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WILLIAMS & ROGERS SERIES 


NEW 

Modern Illustrative Bookkeeping 

ELEMENTARY AND ADVANCED COURSES 


Based upon New Modem Illustrative Bookkeeping, 
Complete Course 


CV^Us Tore-it 

It 



SCRIPT BY EDWARD C. MILLS AND CHARLES E. LESLIE 


AMERICAN BOOK COMPANY 

NEW YORK CINCINNATI CHICAGO BOSTON ATLANTA 




Hl-skss 

, "RkSZ. 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 
ELEMENTARY COURSE 

Copyright, 1918 and 1923, by 

AMERICAN BOOK COMPANY 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 
ADVANCED COURSE 

Copyright, 1919, by 

AMERICAN BOOK COMPANY 


All rights reserved 


NEW MOD. ILL. BKG. ELEM. AND ADV. 
W. P. I 


V 


: raiTsferrecf from 
Wight Office 

sep ^ m 



MADE IN U. S. A. 

AUG 23 1924 / w 






PREFACE 


In the teaching of a subject like elementary Bookkeeping, where instruction in the theory 
and practice in the art must keep pace with each other, it is difficult under the most favorable 
conditions of admission and grading to secure such uniformity of progress as will render the class 
method most advantageous. Where the admission is irregular with pupils of a wide range of 
ability entering day by day, it is not possible to group pupils into classes of any considerable size. 
In other words, it is necessary so to arrange the work as to allow each pupil to progress according 
to his ability and the time he wishes to devote to the subject. New Modern Illustrative Book¬ 
keeping is designed to meet this very definite need. 

Definitions, illustrations, discussion of principles, and rules for bookkeeping procedure ac¬ 
company the practice in carefully graded exercises. Those features which are found to offer 
difficulty to the pupil, including statements, ledger closing, notes, drafts, journal entries, etc., 
are given special attention and the regular work is supplemented by frequent drills. Introduc¬ 
tion is made through the medium of the journal, because it is generally held by those who teach 
under the conditions already referred to that it is the best method of approach under those 
conditions. 

In the beginning sets no business papers are used, since it would impose a double burden on 
the beginner — that of learning bookkeeping technique on the one hand, and the use of business 
papers, both new to him, on the other hand. After the student has had a chance to become 
well grounded in the application of the fundamental principles of Bookkeeping, business papers 
are introduced, both incoming and outgoing, thus giving the pupil practice in handling all the 
papers which would be used in the kind of business under consideration. In the later sets the 
use of papers is discontinued, since there does not seem to be any good reason for using so much 
of the pupil’s time in receiving, filing, and making out routine papers, most of which are neces¬ 
sarily duplicates, except as to amounts, of many other similar papers. 

It is believed that the book will meet the needs of the pupils, promote the efficiency of the 
teachers, and satisfy the requirements of the schools for which it is intended. 


3 


CONTENTS 


• Introduction ...... 

Flour and Grain Business, January 
T ransactions . . . 

Posting ...... 

Definitions ..... 

Trial Balance ..... 

Review Questions ..... 

Flour and Grain Business 
F ebruary Transactions 
Check Posting . . . . . 

Accounts Introduced in March 
March Transactions .... 

Trial Balance Errors .... 

Definitions ..... 

Profit and Loss Statement . 

Balance Sheet ..... 

Closing Entries ..... 

Ruling, Closing, and Balancing Accounts 
Proof Trial Balance .... 

Review Questions ..... 

Summary of Bookkeeping Procedure . 
Exercises ...... 

Special Books Introduced 

Banking. 

James M. Hastings' Business 

Introduction ..... 
Transactions ..... 
Instructions for Posting 
Statements . 

Closing the Ledger .... 

Customers’ Statements 
Review Questions ..... 

Accounts Introduced in May 
Special Column Cash Book . 

Exercises ...... 

Henry F. Adams’ Business . 

Introduction ..... 

Transactions ..... 

Adjusting Entries .... 

Depreciation ..... 

Closing the Books .... 

Review Questions ..... 

Exercises ...... 

Exercises Preparatory to the June Work 
I nterest and Discount 
Drafts ...... 

Transferring Accounts 
Accounts Introduced in June 
Henry F. Adams & Co.’s Business 

Introduction ..... 

Transactions ..... 

Adjusting Entries .... 


PAGE 

7 

15 

15 

18 

18 

22 

24 

25 
28 
29 
31 

36 

37 

38 
40 
42 
47 
49 

49 

50 
54 
59 
62 
66 
66 
67 
73 

73 

74 

75 

76 

77 
81 

83 

84 

84 

85 

93 

94 

95 
99 
99 

101 

101 

104 

111 

112 

113 

113 

115 

121 


4 (new M. I. B. ELEM. AND ADV.) 


















CONTENTS 


5 


Henry F. Adams & Co.’s Business ( Continued) 
Closing the Books 
Fire Loss . 

Closing Entries . 

Review Questions . 

Special Principles of Accounting Procedure 
Wholesale Carpet Business 
I ntroduction 
Transactions 
Exercises 
Single Entry 
I ntroduction 
Posting 

Changing to Double Entry 
Transactions 
Review Questions . 

Introduction to the Advanced Course . 

Retail Grocery Business — Single Entry 
B ooks and Forms .... 

Loose Leaf and Card Ledger Systems . 
Transactions — October Business 
Statement of Resources and Liabilities 
Controlling Accounts and Subsidiary Ledgers 
Retail Grocery Business — Double Entry 
T ransactions — November Business 
Profit and Loss Statement . 

Exercises ..... 

Commission, Shipping, and Merchandising Business 
B ooks and Forms 
Transactions — July Business 
Balance Sheet .... 

Exercises ..... 

Wholesale Dry Goods Business . 

Books and Forms ... 

Transactions — August Business . 

Transactions — September Business 
Exercises . 

Corporations 

Stocks and Bonds 
Officers 

Books and Forms 
Propositions 
Exercises . 

Manufacturing 

Books and Forms 
The Voucher System 
Cost Keeping • . 

Shoe Manufacturing Business 
G eneral Explanation 
Transactions — December Business 
Adjusting and Closing Entries 
Exercises ..... 

Analysis of Financial Reports and Statements 
Auditing 

Exercises . 


PAGE 
. 121 
. 122 
. 123 

. 124 

. 125 

. 132 

. 132 

. 133 

. 136 

. 143 

. 143 

. 145 

. 146 

. 147 
. 149 

. 154 

. 155 

. 155 

. 163 

. 165 

. 172 

. 173 

. 174 

. 176 

. 184 

. 184 

. 188 
. 189 

. 202 
. 214 

. 215 
. 219 

. 219 
. 229 
. 243 
. 248 
. 252 

. 254 
. 256 
. 257 

. 260 
. 263 
. 266 
. 267 
. 269 

. 274 

. 277 
. 280 
. 285 
. 294 

. 300 

. 305 
. 311 
. 317 


Trade Acceptances 
Index 


320 

323 


(new M. I. B. ELEM. AND ADV.) 

















TO THE STUDENT 


Accuracy is the first essential of business, and accuracy is for the most part a matter of 
carefulness. Every mistake the student makes is traceable to lack of care or failure to follow 
instructions. 

All mathematical work should be verified. Mistakes arise not so much because the stu¬ 
dent does not know, as because he takes for granted things of which he ought to make certain. 

Next to accuracy, form is of the greatest importance to the bookkeeper, and form is meant 
to include penmanship, style of arrangement, and everything that goes to make an attractive 
piece of work. 

Figures require especial attention from the bookkeeper. The context surrounding a word 
usually furnishes a clue to the word, but no such aid may be depended upon in figures. Each 
figure stands by itself. It is legible or it is not. Ability to make neat, plain, standard figures 
is indispensable to the bookkeeper. 

Ruling is done in either red or black ink. If black ink is used, it results in some saving of 
time, but red ink adds to the attractiveness of the record. Use red ink unless otherwise in¬ 
structed. Hold the ruler with the figures next to you. The edge away from you then stands 
out further at the top than at the bottom. Place the pen against this projection. The pen 
should be held perpendicularly. The projection on the ruler serves three purposes. It pre¬ 
vents the pen point from coming in contact with the ruler, and so dropping ink on the paper; 
it prevents blotting if the i;uler is slightly moved; and it makes it possible to draw two or more 
lines without moving the ruler. The ruled lines should be light; the double lines should be as 
close together as possible. To draw double lines do not move the ruler; simply tilt the pen¬ 
holder slightly away from you. Hold the ruler firmly, and do not change the angle of the pen¬ 
holder, and the resulting lines will be parallel. Practice until you acquire speed and accuracy 
in ruling. 

Details. — There are no trifles. Nothing is too small to be of importance. If it is a part 
of the work, it is an important part of the work. Follow the instructions. Nothing is good 
enough if it is not right. If each thing is done well, nothing will be difficult. 


NEW 

MODERN ILLUSTRATIVE BOOKKEEPING 

ELEMENTARY COURSE 


Bookkeeping consists in making a systematic record of business transactions. 

The Object of Bookkeeping is to show the proprietor at any time whether his business is 
being conducted at a profit or loss; to indicate the sources from which the profits and losses 
arise; and to furnish a record of all debts owed by the business, and of all debts due and all 
property belonging to the business. 

Double-Entry Bookkeeping provides for keeping accounts with persons, property, expenses, 
and allowances. 

Single-Entry Bookkeeping provides for keeping accounts with persons only. 

The Books Required depend upon the nature of the business, but a complete record of any 
business may be kept in two books — the journal and the ledger. 

The Journal, if it is the only book of original entry, contains a record of all transactions in 
the order in which they occur. 

The journal, in its simplest form, is not extensively used. Most transactions are recorded 
in some modification of the journal, as the cash journal, sales journal, purchases journal, etc. 

The Ledger is the book of accounts. In it are summarized, under the various accounts 
affected, all transactions recorded in any book of original entry. 

Other Terms Defined. — A Business Transaction is an exchange of values between 
persons, such as a purchase or sale of goods, a receipt or payment of money, etc. 

A Completed Transaction is one in which the exchange is made by both persons, as 
when one buys goods for cash. 

An Uncompleted Transaction is one in which something remains to be done by one of the 
persons, as when one buys goods to be paid for at some future time. Such a transaction is said 
to be “on account.” 

Every transaction affects at least two accounts. The changes in the accounts are opposite 
in their nature, but equal in amount. If goods are bought for cash, the stock of goods is in¬ 
creased and the amount of cash decreased. 

Debit and Credit are technical bookkeeping terms, used chiefly to denote position. By 
the use of these terms the effect of a transaction upon the accounts involved is indicated. 

Journalizing is the process of determining the debits and credits of business transactions 
and recording them in the journal. The debits and credits may be determined by rule, and 
they must always be equal. When such record, together with the business narrative, or ex¬ 
planation, has been made, it is called a journal entry. 

In journalizing, the debits are placed to the left; the credits are placed to the right. In 
posting, or in transferring the entries from the journal to the ledger, the debits are likewise 
placed to the left; the credits, to the right. 


7 


8 


ELEMENTARY COURSE 


EXERCISES FOR THE STUDENT 

Ex. (a) On a sheet of ledger paper, rule clear across the page, in red ink, double lines exactly 

in the middle of the spaces between blue lines, as here illustrated -Blue line 

Double red line, 
-Blue line 

Ex. (6) On a sheet of journal paper copy neatly the model journal shown on the following 
pages, following carefully the script forms of both letters and figures. Always write the current 
year in full, instead of 19—. 

The purpose of this exercise is to familiarize the student with the form of the journal. 
Attention is called to the following points: 

1 The complete date is written at the top of each page; otherwise, only the day is written 
unless the record enters a new month. 

2 The technical entry consists of a debit name and a credit name; a debit money column 
and a credit money column, each containing the same amount. 

3 The narrative gives a brief, concise history of the transaction. 

4 The index figures in the folio (page) column at the extreme left indicate the page of the 
ledger to which the item is transferred. They are not a part of the entry at the time it is made, 
but are inserted at the time the transfer is made to the ledger. 

5 The purchases are not itemized, since the invoice may be referred to, if necessary. * Usu¬ 
ally the system of billing used provides for a duplicate invoice of goods sold, in which case it is 
not necessary to record the sales items in the journal, or sales book. 

Ex. (c) On loose ledger paper, copy carefully the model ledger shown on the pages imme¬ 
diately following the model journal. Make the ledger headings larger than ordinary writing. 
Write each one on a blue line, and center it so that the triple vertical line will come exactly in 
the middle of the heading. Rule a double red line in the space under each heading, except at 
the top of the page. 

Attention is called to the following features of the ledger: 

1 If the account is a personal account, the address of the person is a part of the ledger 
heading. 

2 The year date is written in small figures at the top of the date column, and it is not re¬ 
peated unless the year date of the transactions changes. 

3 The entries are of the same date and for the same amount as the corresponding journal 
entries, but the arrangement is different and the detail is omitted. 

4 The name of the month is written for the first transaction in the space provided, but 
the same month is not rewritten for succeeding entries. 

5 There is a debit column and a credit column, and the record in each column follows the 
record in the journal. 

6 At the left of each money column is a folio column, in which the page of the journal 
from which the entry w;as transferred is indicated. This paging, or indexing, is done in both 
books at the time the transfer is made, and furnishes a ready means of reference from the 
ledger to the journal and vice versa. 

7 Personal accounts which balance are ruled with a single line. 







PRELIMINARY EXERCISES 


9 


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10 


ELEMENTARY COURSE 




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14 


ELEMENTARY COURSE 



















































































JANUARY 


15 


BUSINESS NARRATIVE —JANUARY 

Beginning on the first page of Blank No. 1, make the journal entries for the following trans¬ 
actions, following the forms shown in the model journal. 

No. 1 January 1, 19— I (student’s name) engage in the Flour and Grain business, at 
245 Main Street, investing cash, $4000. 

Bookkeeping, Procedure 1 . — Debit Cash with all cash received. 

B. P. 1 2. — Credit Proprietor , Capital , with his original investment and all subsequent 
investments. 

Write January 1 and the current year on the blue line at the top of the first page in the 
journal. 

Determine what account is to be debited. Cash has been received, hence Cash should be 
debited. 

The Proprietor has invested $4000, hence his account should be credited. 

In the space provided for that purpose, write a narrative of the transaction. The correct 
form of the entry is illustrated below. 


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The journal entry may be read thus: “Cash to F. W. Leonard, $3500.” The name of the 
account debited should be read first, followed by the word “to” and the name of the account 
credited. The amount is named but once. 

No. 2 January 2 Paid J. C. Smith $75 for rent of store for January. 

B P 3 — Debit General Expenses with all expenses of the business , except those for 
which a separate account is kept. 

The number of expense accounts, each with a different title, depends upon the size and 
nature of the business, and the amount of detail which it is proposed to show. In this set all 
the expenses of the business are charged to General Expenses. 

B. p. 4. — Credit Cash with all cash paid. 

After each entry, leave one line blank, except that the day of the month should be written 
in the center of this line. Upon beginning a new month, or starting a new page, the complete 
date should be written. 

l The initials “B. P.” will be used in all further references to “ Bookkeeping Procedure.” 













16 


ELEMENTARY COURSE 


The correct form of this entry is illustrated below. 

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No. 3 January 2 Bought of Scranton & Wetmore books and stationery for olnce use, 
for which I paid cash, $15. 

Debit General Expenses (B. P. 3); credit Cash (B. P. 4). 

No. 4 January 3 Bought of the Upton Coal Co., for cash, for use in store, 5 tons of coal 
at $5.50 per ton; total, $27.50. 

As the coal is to be used for fuel, in carrying on the business, it is an expense. Make entry 
similar to those for transactions Nos. 2 and 3. 

No. 5 January 3 Paid $10.50 for 500 stamped envelopes. 

No. 6 January 4 Bought of P. D. Hamlin merchandise as per his invoice of January 3, 
$530. Terms: Cash. 

Goods'bought to be sold are called “Merchandise.” Incoming merchandise is entered 
under Purchases; outgoing merchandise is entered under Sales. 

In a wholesale business a transaction, the terms of which are “Cash,” is not quite like a 
cash transaction in a retail store, where the goods are purchased and the money is paid over 
the counter at the time the sale is made. Wholesale orders are taken by traveling salesmen, 
or received by mail or telephone, so that even though the terms are Cash, the money is not 
necessarily received at the time of the sale; and, if cash is not received at the time the goods 
are shipped, the buyer’s account is charged for their value. 

B. P. 5. — Debit PURCHASES with the purchase price of all merchandise purchased. 

B. P. 6. — Credit a person with the purchase price of merchandise purchased from him. 

If the purchase is for “spot” cash, or cash on delivery, Purchases may be debited and 
Cash credited, instead of running the transaction through the personal account. 

The correct form of this entry is illustrated below. 


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3 


No. 7 January 4 Bought of Charles A. Hubbard invoice of merchandise, dated Jan. 3, 
$300. Terms: Cash. 

This transaction is similar to the preceding one. (B. P. 5 and 6.) 

No. 8 January 4 Bought of M. F. Lynch invoice of merchandise, dated Jan. 3, $175. 
Terms: Cash. (B. P. 5 and 6.) 

No. 9 January 4 Bought of H. P* Dennis & Co. invoice of merchandise, dated Jan. 3, 
$255. Terms: Cash. 











JANUARY 


17 


No. 10 January 5 Paid P. D. Hamlin for his invoice of Jan. 3, $530. 

B. P.7. — Debit a person with cash or notes given to him on account 

Although the terms of the purchase were cash, P. D. Hamlin was credited for the amount, 
and during the time which elapsed between the purchase of the goods and the payment, the 
transaction was on account. 

The correct form for the entry is illustrated below. 






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The student may now observe that the net result of the entries for the transaction with 
P. D. Hamlin is a debit to Purchases and a credit to Cash. The credit to P. D. Hamlin on the 
fourth is canceled by the debit to P. D. Hamlin on the fifth. The record, however, is more 
complete than if the transaction had been disposed of without using the personal account. 

No. 11 January 5 Paid Charles A. Hubbard for his invoice of Jan. 3, $300. 

This transaction is similar to the preceding one. (B. P. 7 and 4.) 

No. 12 January 5 Paid M. F. Lynch for his invoice of January 3, $175. 

No. 13 January 5 Paid H. P. Dennis & Co. for their invoice of January 3, $255. 

No. 14 January 5 Sold Wilson Bros. 50 bu. Rye at $1.20 per bu., 25 bbl. Flour at $9 per 

bbl.; total, $285. Terms: Cash. 

“Cash” terms, as already explained, do not usually mean that the goods are paid for at 
the time the sale is made. Some time usually elapses between the sale and the payment. In 
the meantime the goods are actually “on account.” 

B. P. 8. — Debit a person with the sale price of merchandise sold to him. 

B. P. 9. — Credit Sales with the sale price of all merchandise sold. 

If the sale is for “spot” cash, it may be handled without passing through the personal 
account, but even then, if the buyer is, or is likely to become a regular customer, it is better to 
have his account show all transactions with him. 

Assuming that no other record is made of the items sold, they will be recorded in the 
journal. 

The correct form of the entry is illustrated below. 





7o £ 
















18 


ELEMENTARY COURSE 


No. 15 January 6 Sold H. A. Harvey 200 bu. Oats at 70^ per bu.; total, $140. Terms: 
Cash. 

The transaction is similar to the preceding one. (B. P. 8 and 9.) 

No. 16 January 6 Sold W. D. Menter 100 bu. Corn at 80^ per bu.; total, $80. Terms: 
Cash. 

No. 17 January 6 Sold J. B. Hamill 100 bu. Oats at 72j i per bu., 50 bu. Com at 80^ per 
bu.; total, $112. 

No. 18 January 6 Wilson Bros, pay your invoice of Jan. 5, $285. 

B. P. 10. — Credit a 'person with cash or notes received from him on account. 

What account should be debited? 

The correct form for the entry is illustrated below. 



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No. 19 January 6 Received payment from H. A. Harvey for invoice of this date, $140. 

The transaction is similar to the preceding one. 

No. 20 January 6 Received payment from W. D. Menter for invoice of this date, $80. 

No. 21 January 6 Received payment from J. B. Hamill for invoice of this date, $112. 

Posting is the process of transferring debit and credit entries from the journal or other books 
of original entry to appropriate accounts in the ledger. 

In the journal, the transactions are entered as they occur, and no attempt is made to group 
similar items. In the ledger, although the transactions are entered in the order of their occur¬ 
rence, they are primarily arranged in groups of similar items called accounts. 

An Account is a collection of similar items grouped under an appropriate heading. 

Accounts may be classified, with regard to their titles, as follows: 

1 Accounts with persons. 

2 Accounts with cash, notes, and other mediums of exchange. 

3 Accounts with property. 

4 Accounts with income or profit, expenses, allowances, and services. 

Personal accounts are those kept with individuals, firms, and corporations with which the 
business has dealings. 

Personal accounts are of two classes; namely, those with debtors and those with creditors. 
A debtor is one who owes, or who has received credit. A creditor is one who is owed, or who 
has given credit. 

Accounts with debtors, taken collectively, are called Accounts Receivable, because they 
indicate the amount which is to be received from persons. 

Accounts with creditors, taken collectively, are called Accounts Payable, because they in¬ 
dicate the amount which is to be paid to persons. 

When the posting is completed, all the debit cash items in the journal will appear on the 
debit side of the Cash account in the ledger, and all the credit cash items in the journal will 








JANUARY 


19 


appear on the credit side of the Cash account in the ledger. All purchase items in the journal 
will appear on the debit side of the Purchases account in the ledger, and all sales items in the 
journal will appear on the credit side of the Sales account in the ledger. A similar condition 
will result in all other accounts of the business. ' 

There is no stated time at which posting should be done, but it must be completed at the 
close of the month in order that the statements may be made up. 

Great care should be used to see that all debits are transferred to the debit side of 
the proper accounts in the ledger, and that all credits are transferred to the credit side of the 
proper accounts in the ledger. It is a common error to post a debit item to the credit side, or a 
credit item to the debit side of an account, especially when debits and credits are posted alter¬ 
nately. 

It is preferable to post all debits first and then all credits. As by this method the book¬ 
keeper is posting to only one side of the ledger at any time, he reduces the danger of posting to 
the wrong side of an account. 

Opening Ledger Accounts. — Examine the model ledger on page 12, and notice the form 
and arrangement of the accounts. In Blank No. 2, following the pages reserved for the index, 
open the following accounts, putting four on each page. 

Cash 

Wilson Brothers, 215 Willow St., City 
H. A. Harvey, 175 Market St., “ 

W. D. Menter, 316 State St., “ 

J. B. Hamill, 75 Third Ave., 

P. D. Hamlin, 228 Brady St., “ 

Charles A. Hubbard, 457 Summer St., “ 

M. F. Lynch, 259 Ward St., 

H. P. Dennis, 86 Front St., “ 

Student, Capital 
Sales 
Purchases 
General Expenses 

Rule a double red line under the ledger headings, except those which come at the top of a 
page. Number the journal and ledger pages. (The ledger page following the index pages 
should be numbered 1.) 

Instructions for Posting. — 1 The first debit item in the journal is Cash, $4000. Turn to 
the Cash account in the ledger and write the amount, 4000 (use no dollar signs), on the 
debit side of this account. Write the number (1) of the journal page from which the amount 
is posted in the folio column of the ledger, and write the date of the transaction, as shown by 
the journal entry (Jan. 1) in the date column of the ledger. Write the current year above the 
first entry in the date column, as directed in Exercise 3. The following illustration shows the 
correct form for the ledger entry 

















20 


ELEMENTARY COURSE 


Enter the number of the ledger page containing the Cash. 

In the folio column of the journal, to the left of the word “Cash,” write the ledger page 
(1) to which the item is posted, as in the illustration. 




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Paging, or postmarking, is important because it is an indication that the posting has been 
done and because it facilitates reference from one book to the other. Never omit it. 

2 The next debit item in the journal is General Expenses, $75. Turn to the General Ex¬ 
penses account in the ledger and write 75 in the amount column on the debit side. Write the 
journal page number (1) in the folio column, and the date of the transaction (Jan. 2) in the 
date column. Always enter the year at the top of the date column. Note the illustration. 






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Write the ledger page number (4) in the folio column of the journal. See illustration of 
journal under 1. 

3 The next debit item in the journal is General Expenses. Turn again to the debit side of 
the General Expenses account in the ledger and enter the amount in the money column. Enter 
the journal page number and the date. The month need not be rewritten. The following illus¬ 
tration shows the General Expenses account as it should now appear in the ledger. 





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JANUARY 


21 


Write the ledger page number in the folio column of the journal. 

4 The next debit item in the journal is General Expenses, $27.50. Post this item, follow¬ 
ing previous instructions. 

5 The next debit item in the journal is General Expenses $10.50. Post this item. 

6 The next debit item is Purchases, $530. Turn to the Purchases account in the ledger 
and post this item, following the usual routine. Do not omit any feature. Note the following 
illustration. 







! L 


/ 





4 ^ 


/ 

S3 0 








7 Post the next three items to the debit side of the Purchases account. 

8 The tenth debit item in the journal is P. D. Hamlin, $530. Post this item to Hamlin’s 
account in the ledger. 

9 Post the next three debit items to the debit side of the respective personal accounts. 

10 Post the next four debit items to the debit side of the accounts named — Wilson Bros., 
H. A. Harvey, W. D. Menter, and J. B. Hamill. 

11 Post the next four debit items to the debit side, of the Cash account. 

12 The first credit item in the journal is Student, Capital, $4000. The credit posting is 
exactly the same as the debit posting, except that the items must be carried to the credit side. 
The following illustration shows how Student’s Capital account should appear after the entry 
is posted. 



13 Post the next four items to the credit side of the Cash account. 

14 The next credit item is P. D. Hamlin, $530. When this item is posted to the credit 
side of P. D. Hamlin’s account in the ledger, the account will have an equal amount on each 
side; that is, it will balance. The account should be ruled as shown in the following illus¬ 
tration. 







y 



/ 







2- 

S3 a 


<?- 

*2 


/ 

236 






























































22 


ELEMENTARY COURSE 


When a personal account is ruled, it indicates that all transactions recorded above the 
ruled lines have been completed. 

15 As each of the next three credit items is posted, a personal account will balance. Rule 
as instructed above. 

16 Post the next four credit items to the credit side of the Cash account. Do not omit 
dates and index pages. 

17 Post the next four credit items to the credit side of Sales account. 

18 As each of the remaining four credit items is posted, a personal account will balance. 
Rule as instructed in No. 14. 

All the debit items in the journal have now been transferred to the debit side of the ledger; 
and all the credit items, to the credit side. As the amounts in the debit column and credit 
column of the journal are equal, it follows, if no mistake has been made in posting, that the 
total debits and total credits of the ledger must also be equal. To test the accuracy of the 
debit and credit posting, a trial balance is taken. 

THE TRIAL BALANCE . 

The balance of an account is the difference between the debit side and the credit side. If 
the debit side is the larger, the account shows a debit balance. If the credit side is the larger, 
the account shows a credit balance. 

An account which shows a balance is technically an open account. 

A trial balance is a statement exhibiting either the total debits and total credits or the bal¬ 
ances of all the open accounts in the ledger. If the totals are used, it is called a trial balance of 
totals. If the differences are used, it is called a trial balance of balances. The latter form is 
generally more desirable, because in the statements which follow balances must be used. 

At the top of a sheet of journal paper write the words trial balance, and the proper date. 
Under this, at the left-hand side of the sheet write the names of all the open accounts that 
appear in your ledger, with the ledger pages in the folio column. Do not include the personal 
accounts, because they are closed. The following illustrates the form. 




6. /J — 








The names of the accounts in your trial balance must be. the names of the accounts in 
your ledger. 

The first account in your trial balance is the Cash account. Add the several items on the 
debit side of the Cash account and write the sum in very small, light pencil figures directly 
under and close to the last debit item. 

Add the credit items of the Cash account in the same way, writing the total in very small 
pencil figures close under the last credit item. 

The following illustrates the form of a Cash account properly footed; the amounts and 
other particulars are different from those shown in the Student’s Cash account. 














JANUARY 


23 



Find the balance of the Cash account by taking the difference between the debit total and 
the credit total. Transfer the debit balance ($3229) to the debit column of the trial balance. 

The next account in the trial balance is Student's Capital account. Since there are no 
debits in this account and but one credit, the latter is transferred to the credit column of the 
trial balance, opposite Student's name. 

Add the items in the Purchases account. Write the total in small figures close under the 
last entry. Transfer the total to the debit column of the trial balance, opposite the word Pur¬ 
chases. 

Add the Sales account, and transfer the total to the credit column of the trial balance, 
opposite the word Sales. 

Add the General Expenses account, and transfer the total to the debit column of the trial 
balance. 

Add the debit and credit columns of the trial balance. The totals should be equal. If 
they are not, it is evident that an error has been made, and the work must be reviewed until 
the error is found. If an error is made in a pencil footing, it may be erased, but if it is written 
in ink, erasing is not permissible. A correction may be made by drawing a red-ink line through 
the wrong entry and writing the correct amount above it. 

The following is the form of a trial balance containing the same number of items as the 
Student's trial balance. The amounts are different. 




/ 

3 

3 

3 

a. 






3 C o o 


/ // Co 


107 


jr 2- fsso 


Vo 


Woo 


2 fs so 


If the footings of the trial balance are equal, write them in ink, rule the trial balance as in 
the above illustration, and present it with your journal and ledger to your teacher for approval. 
After the work has been approved, copy the trial balance in Blank No. 1 in the space provided 
for trial balances, as indicated on the front cover. 






































24 


ELEMENTARY COURSE 


REVIEW QUESTIONS 

1 Define bookkeeping. Define double-entry bookkeeping. 

2 What books are required to make a complete record of any business? 

3 What should the journal contain? 

4 What should the ledger contain? 

5 What is a business transaction? 

6 Define journalizing. 

7 What is a completed transaction? 

8 Why should the debits and credits of every journal entry be equal? 

9 What does “on account” mean? 

10 When should Cash be debited? 

11 What is an account? 

12 When should General Expenses be debited? 

13 What items should be charged to General Expenses account? 

14 What are the two leading points to be considered in writing the explanatory record 
your journal entries? 

15 What is merchandise? 

16 When should Purchases be debited? 

17 When should Sales be credited? 

18 What do the words debit and credit mean? 

19 Define posting. When should posting be done? 

20 How may accounts be classified with regard to their titles? 

21 What is the object of a trial balance? 

22 How often should a trial balance be taken? 

23 What names should appear on a trial balance? 

24 Why should the debit and credit columns of a trial balance show equal footings? 

25 Does a trial balance prove the work to be correct ; if not, what does it prove? 

26 What is the purpose of pencil footings in the ledger? 

27 What is an incomplete transaction? 


FEBRUARY 


25 


BUSINESS NARRATIVE — FEBRUARY 

Beginning on the first blank page of Blank No. 1, make the journal entries required for the 
following transactions: 

No. 1 February 1, 19— I (Student’s name) engage in the Flour and Grain business, at 
360 Market Street, investing cash, $2500. (B. P. 1 and 2.) 

Write the complete date at the top of the page. 

No. 2 February 2 Paid Henry Jones rent for store, two months in advance, cash, $100. 

No. 3 February 3 Bought of R. C. Thompson invoice of merchandise, dated Feb. 2, 
$800. Terms: Cash. (B. P. 5 and 6.) 

For form of entry similar to this, see page 16. 

No. 4 February 5 Sold A. H. Warren 25 bbl. Flour at $9 per bbl., $225. Terms: Cash. 
(B. P. 8 and 9.) 

No. 5 February 5 Paid R. C. Thompson for his invoice of Feb. 3, $800. (B. P. 7 and 8.) 

No. 6 February 6 Bought of Winter Bros, invoice of merchandise, dated Feb. 5, $210. 
Terms: Cash. 

Entry similar to that for transaction No. 3. 

No. 7 February 6 Received cash from A. H. Warren, in payment of your invoice of Feb. 
4, $225. (B. P. 1 and 10.) 

No. 8 February 7 Sold Wm. Archer & Co. 25 bbl. Flour at $9 per bbl., 100 bu. Corn at 
80^perbu.; total $305. Terms: Cash. 

Entry similar to that for transaction No. 4. 

No. 9 February 7 Paid Winter Bros, for their invoice of Feb. 5, $210. 

No. 10 February 8 Bought of Arthur McMillan invoice of merchandise, dated Feb. 7, 
$786. Terms: Cash. 

No. 11 February 8 Received payment from William Archer & Co. for your invoice of 
Feb. 7, $305. 

No. 12 February 9 Paid cash for clerk hire, $25. 

No. 13 February 9 Paid Arthur McMillan for his invoice of Feb. 7, $786. 

No. 14 February 10 Sold E. H. French & Co. 30 bbl. Flour at $8.75 per bbl., 50 bu. Corn 
at 88^ per bu.; total $306.50. Terms: Cash. 

No. 15 February 12 Bought of John C. Cornell invoice of merchandise, dated Feb. 12, 
$110. Terms: Cash. 

No. 16 February 12 Received payment from E. H. French & Co. for your invoice of Feb. 
10, $306.50. 

No. 17 February 12 Paid John C. Cornell for his invoice of this date, $110. 

No. 18 Preparatory to posting the entries already recorded in February, open ledger ac¬ 
counts under the headings given below. The list includes all accounts which are to be used for 
February and March. Pay attention to details. Follow instructions carefully. 


26 


ELEMENTARY COURSE 


LEDGER ACCOUNTS FOR FEBRUARY AND MARCH 


Cash 1 page 

Notes Receivable J4 “ 

Personal Accounts Receivable as follows, allowing 34 page to each account: 


E. B. Adams, 117 Main St. 

William Archer & Co., 125 Park Avenue 
S. A. Dodge & Co., Market Square 
Emerson & Sons, 96 Exchange St. 

E. H. French & Co., 452 Third Avenue 
J. B. Fulton, 75 Brady St. 


F. W. Garland, 83 Howard St. 
Roberts Brothers, 128 Market St. 
W. A. Scott, 17 Monroe St. 

J. S. Sumner, 75 First Avenue 
A. H. Warren, 378 Hamilton St. 
Weston & Hill, 289 Pine St. 


Personal Accounts Payable as follows, allowing 34 page to each account: 


H. S. Clough & Co., 165 Broad St. 

J. C. Cornell, 78 Harper St. 

Charles Hill & Co., 119 Seventh Avenue 
Kidder & Hill, 49 Fort St. 

A. J. Lane, 265 Murray St. 

Arthur McMillan, 79 Thompson St. 


Rice, Miller & Co., 368 Second Avenue 
F. A. Smith, 924 Seventh St. 

W. H. Stevens, 76 Broadway 
R. C. Thompson, 113 Howard Avenue 
Warner & Freeman, 765 Grand Avenue 
Winter Brothers, 123 Liberty St. 


Other accounts as follows: 

Notes Payable 34 page 

Student, Capital J4 “ 

Student, Personal 34 “ 

Sales 1 “ 


Purchases 1 page 

General Expenses 34 “ 

Freight and Cartage 34 “ 

Profit and Loss 34 “ 


No. 19 Post the February entries to the ledger. Use great care as to details. Enter the 
amount in the right account, on the right side, and for the right sum. Index the posting accu¬ 
rately, both in the journal and in the ledger. If you do everything well, nothing will be diffi¬ 
cult. Follow the order of posting used for the January entries — 1, enter the amount in the 
ledger money column; 2, enter the journal page in the ledger folio column; 3, enter the date 
in the ledger date column, always writing the current year at the top; 4, enter the ledger page 
in the journal folio column. 

No. 20 As the posting proceeds, it will be found that the accounts of R. C. Thompson, 
A. H. Warren, Winter Bros., Wm. Archer & Co., Arthur McMillan, E. H. French & Co., and 
John C. Cornell balance. Rule them as instructed. (See model ledger for form.) 

No. 21 Take a trial balance from your ledger. It will be similar in form to the trial bal¬ 
ance for January. 

No. 22 Submit the journal, ledger, and trial balance to the teacher for inspection and 
approval. 

No. 23 After the trial balance has been approved, copy it in Blank No. 1, following the 
trial balance for January. 


FEBRUARY 


27 


FEBRUARY BUSINESS, CONTINUED 

No. 24 February 14 Bought of A. J. Lane invoice dated Feb. 13, $82.50. Terms: On 
account 30 days. 

The fact that the buyer has 30 days in which to pay for the goods does not change the 
form of the entry. As already noted, in a wholesale business, even when the terms are Cash, 
the transaction is usually on account for a short time. In this transaction, while the invoice 
may be paid at any time, the buyer agrees to pay it within the time stated. (B. P. 5 and 6.) 

No. 25 February 15 Bought of W. H. Stevens invoice of this date, $198. Terms: On 
account. 

No. 26 February 15 Bought of F. A. Smith & Co. invoice dated Feb. 14, $165. Terms: 
On account 10 days. 

No. 27 February 16 Sold W. A. Scott 100 bu. Oats at 72^ per bu., $72. Terms: On 
account 10 days. (B. P. 8 and 9.) 

No. 28 February 17 Sold S. A. Dodge & Co. 25 bbl. Flour at $9.50 per bbl., $237.50. 
Terms: On account 60 days. 

No. 29 February 17 Sold J. S. Sumner 250 bu. Rye at $1.20 per bu., 250 bu. Oats at.72^ 
per bu., 300 bu. Corn at 80^ per bu.; total, $720. Terms: On account. 

No. 30 February 19 Sold E. H. French & Co. 25 bbl. Flour at $9.20 per bbl., 100 bu. 
Oats at 72 ± per bu., 50 bu. Corn at 80j£ per bu.; total, $342. Terms: On account 10 days. 

No. 31 February 20 Sold E. B. Adams 200 bu. Oats at 76 £ per bu., $152. Terms: Cash. 
No. 32 February 23 Bought of Rice, Miller & Co., invoice dated Feb. 22, $352.50. 
Terms: On account. 

No. 33 February 24 Sold Roberts Bros. 100 bu. Rye at $1.20 per bu., $120. Terms: 
Cash. 

No. 34 February 25 Received from W. A. Scott cash, in payment of your invoice of Feb. 
16, $72. (B. P. 1 and 10.) 

No. 35 February 25 Received from E. B. Adams cash, in payment of your invoice of 
Feb. 20, $152. 

No. 36 February 25 Received from Roberts Bros, cash, in payment of your invoice of 
Feb. 24, $120. 

No. 37 February 26 Received cash of J. S. Sumner, to apply on account of your invoice 
of Feb. 17, $100. 

The transaction is similar to the preceding one, but J. S. Sumner pays only a part of the 
amount which he owes. 

Paid A. J. Lane for his invoice of Feb. 13, $82.50. (B. P. 7 and 4.) 
Paid W. H. Stevens $100, to apply on account of his invoice of 


Received cash of E. H. French & Co., in payment of your invoice of 


No. 38 February 27 
No. 39 February 28 
Feb. 15. 

No. 40 February 28 
the 19th inst., $342. 

No. 41 February 28 Sold Emerson & Sons, 50 bu. Corn at 80^ per bu., 30 bbl. Flour at 
$9 per bbl., 50 bu. Oats at 70j£ per bu.; total, $345. Terms: On account. 

No. 42 February 28 Paid cash for postage and advertising, $12. (B. P. 3 and 4.) 


28 


ELEMENTARY COURSE 


No. 43 Post the entries from the journal to the ledger, according to instructions previ¬ 
ously given. The necessary accounts are already opened in the ledger. Post to the open ac¬ 
counts, Cash, Purchases, Sales, and General Expenses exactly as though no trial balance had 
been taken during the month. Skip no lines on account of the pencil figures. Leave the pencil 
figures in the accounts, and when the trial balance for the completed month’s work is taken, 
add the pencil figures with the items which follow. 


CHECKING 


Checking is the process of verifying the posting, in order to detect and correct any errors 
which may have been made. 

No. 44 Check the posting for February. Use a sharp-pointed pencil. In the first entry 
for the month, Cash is debited $2500. Turn to the cash account in the ledger and place a small 
check mark (V), as illustrated in the following form, on the vertical double line to the left of 
the amount, 2500. 









\ 



/ 

1 1 

1 . 1 

1 





In the journal place a similar check mark on the line to the left of the word Cash, as illus¬ 
trated by the first check mark in the form below. 

Make the check mark very small and always on the same vertical line. 

Check all the debit items. Find the correct amount in the ledger and check it there before 
checking it in the journal. Inspect each amount to see that it has been written correctly, as 
errors are often made by transposing or misplacing figures, thus: $125 for $152; $1.50 for $150. 

After checking all the debits, proceed in like manner to check all the credit items. Note 
the location of the check mark for the first credit item in the journal, as illustrated below. 


y /, /? - 



If an item has been omitted, or posted to the wrong account, or to the wrong side of an 
account, it will be observed in checking. If an amount has been posted twice, it will appear 
once in the ledger unchecked, and thus the error will be detected. 

























FEBRUARY 


29 


If the student finds no error, he may conclude that checking is a waste of time, or that it 
should not be undertaken unless an error occurs in the trial balance. That this conclusion is 
unwarranted, the following facts will show. 

1 An error in posting may or may not affect the equality of debits and credits. For in¬ 
stance, if a debit of $300 is posted to W. H. Stevens’ account when it should have been posted 
to Rice, Miller & Co.’s account, the equality of debits and credits is not affected, and yet a 
serious error in posting has been made. 

2 Posting is usually done from day to day, when there is time both for posting and check¬ 
ing. If the bookkeeper does not check the posting as he goes along, he is likely to find that he 
must check it all at a time when he is rushed. 

3 In the interest of accuracy the posting should be verified. 

No. 45 Rule all ledger accounts which balance. The accounts to be ruled at this time are 
E. B. Adams, Roberts Bros., W. A. Scott, E. H. French & Co., and A. J. Lane. 

No. 46 Foot the ledger accounts in small pencil figures, and take a trial balance. The 
accounts which are ruled will be omitted from the trial balance. The debits and credits of 
these accounts are equal, and their omission will not affect the equality of the debits and cred¬ 
its as a whole. 

Trial balances are cumulative; that is, each succeeding trial balance includes everything 
in every open account, except such equal amounts as have been ruled off in the account. The 
trial balance for Feb. 28 will be a trial balance for the whole month, not for the last half of the 
month. 

No. 47 Submit the journal, ledger, and trial balance to the teacher for approval. After 
the trial balance has been approved, copy it in Blank No. 1, following the trial balance of Feb. 12. 


ACCOUNTS INTRODUCED IN MARCH 

Notes Receivable and Notes Payable. — A negotiable promissory note is an unconditional 
promise in writing made by one person to another, signed by the maker, engaging to pay on 
demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. 
(Negotiable Instruments Law.) 

It will be seen from the above definition that there are two original parties to a note. The 
one who promises to pay is called the Maker; the one to whom the promise is made is called 
the Payee. 

An instrument is negotiated when it is transferred from one person to another in such 
manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated 
by delivery; if payable to order, it is negotiated by the indorsement of the holder completed by 
delivery. (Negotiable Instruments Law.) 

One who indorses a note is called the indorser, or transferrer; the one to whom it is nego¬ 
tiated is called the indorsee, or transferee. 

An indorsement is written on the back across the left-hand end of the paper. 

An indorsement may be either special or in blank; and it may also be either restrictive or 
qualified, or conditional. (Negotiable Instruments Law.) 

An instrument is indorsed in blank when the name only of the indorser is signed. Such 
indorsement makes the instrument payable to bearer; hence, the blank indorsement, although 
very common, is not very safe, and should not be used if the paper is to be delivered by mail 
or by messenger. 


30 


ELEMENTARY COURSE 


An instrument is indorsed in full when it specifies the person to whom, or to whose order 
the instrument is to be payable. The full indorsement, also called special indorsement, is prefer¬ 
able, and the holder may, if he chooses, convert a blank indorsement into a special indorsement 
by writing the proper words (see illustration) above the signature. 

The following forms illustrate the two indorsements commonly used. 



SPECIAL OR FULL INDORSEMENT 




An indorsement, then, is necessary (unless the only or last indorsement already on the 
instrument is blank) to negotiate a note. Even though, by reason of a blank indorsement al¬ 
ready upon the paper, the holder’s indorsement is not necessary to negotiation, it will usually 
be required as an evidence of good faith. 

For further discussion of indorsements consult a commercial law text. 

A note is preferable to an open account, because it is a written promise to pay at a certain 
time. It makes certain the amount, and it can be transferred in payment of debts, or dis¬ 
counted at bank for cash. 

The bookkeeper handles notes through two accounts — Notes Receivable and Notes Pay¬ 
able. The distinction is simple. To the maker of a note it is Notes Payable; to any one else 
who owns it, it is Notes Receivable. 

By maturity is meant the date upon which a note becomes due. A note does not bear in¬ 
terest before maturity unless it is so stated in the note, but every note bears interest from 
maturity, if it is not paid. 

By face is meant the sum written in the note. The face of a note does not change. 

The Notes Receivable account and the Notes Payable account, like personal accounts, are 
ruled when they balance. 

Freight and Cartage. — Freight, Cartage, Express, and Postage on goods purchased are a 
part of the cost of purchases, and may be shown in the Purchases account. It is preferable, 
however, to keep a separate account for Freight and Cartage, and at the end of a business 
period to close it into the Purchases account. 

Proprietor’s Personal Account. — The Proprietor’s Personal account contains a record of 
the proprietor’s dealings with the business in all matters except investment or withdrawal of 
investment. It is kept like any other personal account. 








MARCH 


31 


MARCH: CONTINUATION OF FEBRUARY BUSINESS 


No. 48 March 1 Bought of H. S. Clough & Co. invoice of Feb. 28, $1110. Terms: On 
account 10 days. 

Make the entry at the top of the first blank page in the journal, following the work for 
February. 

No. 49 March 2 Sold Wm. Archer & Co., 250 bu. Oats at 76^ per bu., 25 bu. Rye at 
$1.20 per bu.; total, $220. Terms: On account. 

No. 50 March 3 Paid Rice, Miller & Co. cash, $852.50, in payment of invoice of Feb. 23. 

No. 51 March 3 Received cash of Emerson & Sons, to apply on account, $250. 

No. 52 March 5 Paid H. S. Clough & Co. cash on account, $500. 

No. 53 March 6 Bought of Kidder & Hill invoice of March 5. Terms: On account 60 
days. 500 bu. Corn at 68^ per bu. 

Use care in figuring the invoices. Always go over the calculations a second time. It takes 
longer at first, but it will save time in the end. Do not enter the items in the journal. Make 
the entry as usual. 

No. 54 March 7 Paid the Interstate Transportation Co. for freight bills to date, $15. 

B. P. ll.—Debit Freight and Cartage with the cost of freight, cartage, express, and 
postage on merchandise purchased. 

The following illustrates the form of the entry, but the amount is different. 


7 



2 %So 


2-2 So 


No. 55 March 8 Sold E. H. French & Co., 150 bu. Com at 80^ per bu., 200 bu. Oats at 
76 £ per bu. Terms: On account 10 days. 

Calculate the amount of the invoice. Check the calculations to insure accuracy. Enter 
as usual. 

No. 56 March 9 Student withdraws from the business cash, for personal use, $25. 

B. P. 12. — Debit Proprietor, Personal, with all cash withdrawn by him for personal use. 

The proprietor may, if he wishes, pay these small items from time to time, as any other 
individual. If he does not, they are finally transferred to his Capital account. In some in¬ 
stances such items are entered directly in the Capital account, but the better practice is to open 
a Personal account. 



32 


ELEMENTARY COURSE 


The following illustrates the form of the entry. 


7 


Au 


7^r 






7 ^ 


No. 57 March 10 Bought of Kidder & Hill invoice dated March 9. Terms: On account 
30 days. 500 bu. Corn at 72^ per bu., 100 bu. Rye at $1.08 per bu. 

No. 58 March 12 Paid H. S. Clough & Co. cash, $100, to apply on account. 

No. 59 March 12 Sold F. W. Garland 25 bbl. Flour at $9.20 per bbl. Terms: Note at 
10 days. 

Although the terms of this sale are “Note at 10 days,” the transaction will be entered in 
the purchaser’s account, just as all previous sales. 

No. 60 March 13 Received from F. W. Garland his 10-day note, dated March 13, in pay¬ 
ment of your invoice of the same date. 


B. P. 13. — Debit Notes Receivable, at face value, with all notes made by others and received 
by the business. 

The following illustrates the form of the note which F. W. Garland gives you, the place, 
amount and time being different. 



No. 61 March 13 Sold Wm. Archer & Co. 75 bbl. Flour at $9.20 per bbl., receiving their 
note at 15 days in payment. 

This transaction is equivalent to No. 59 and No. 60. Assuming that the note is received 
at the time of the sale, two entries are nevertheless made in order to have a complete record of 
business transacted with Wm. Archer & Co. The two entries will be similar to the two pre¬ 
ceding ones. 

























MARCH 


33 


No. 62 March 14 Received a 30-day note, dated to-day, from S. A. Dodge & Co., on 
account. Face of note, $237.50. (B. P. 13 and 10.) 

No. 63 March 15 Received a 10-day note, dated March 14, from J. S. Sumner, on ac¬ 
count. Face of note, $250. 

Entry similar to that for the preceding transaction. 

No. 64 March 16 Sold S. A. Dodge & Co. 300 bu. Corn at 80j£ per bu., 25 bbl. Flour at 
$9 per bbl. Terms: On account. 

No. 65 March 17 Bought of H. S. Clough & Co. invoice of March 16. Terms: On ac¬ 
count. 50 bbl. Flour at $8 per bbl., 250 bu. Corn at 70^ per bu. 

No. 66 March 19 Sold J. B. Fulton 200 bu. Oats at 76^ per bu., 100 bu. Corn at 80^ per 
bu., receiving his 2-month note in payment. 

Two entries similar to those for No. 61. 

No. 67 March 19 Bought of Kidder & Hill invoice of this date, giving your 10-day note 
in payment, 100 bbl. Flour at $8 per bbl., 250 bu. Corn at 70^ per bu. 

As in No. 61, in order to have a complete record of your transactions with Kidder & Hill, 
you will pass the transaction through their personal account. (B. P. 5 and 6 for the first entry. 
B. P. 7 and 14 for the second entry.) 

B. P. 14. — Credit Notes Payable , at face value, with all notes made and issued by the 
business. 

The following is the form of the note which you will give Kidder & Hill. The amount and 
the address are different. 



No. 68 March 20 Bought of Warner & Freeman invoice dated to-day, giving your note 
at 10 days in payment. 300 bu. Corn at 70^ per bu. 

Make two entries similar to those for No. 67. 

No. 69 March 21 Sold A. H. Warren 25 bbl. Flour at $9.20 per bbl., 95 bu. Corn at 80^ 
per bu., receiving his 30-day note, dated to-day, for the amount of the invoice. 

Entries similar to those for No. 61. 

No. 70 March 22 Sold Weston & Hill 13 bbl. Flour at $9 per bbl., 200 bu. Corn at 75^ 
per bu. Terms: On account. 

No. 71 March 23 Bought of Chas. A. Hill & Co. invoice of this date, and gave them your 
note at 60 days in payment. 500 bu. Oats at 66^ per bu., 250 bu. Corn at 70£ per bu. 

Entries similar to those for No. 68. 

























34 


ELEMENTARY COURSE 


No. 72 March 23 Sold Roberts Bros. 25 bbl. Flour at $9 per bbl. Terms: On account 
15 days. 

No. 73 March 23 F. W. Garland has paid his note of the 13th inst. in cash, $230. 

B. P. 15. — Credit Notes Receivable with amounts received in payment for notes of others 
(;previously entered to the debit of Notes Receivable). 

The note should now be marked “Paid” and returned to F. W. Garland. As Notes Re¬ 
ceivable was debited when the note was received, it is evident that Notes Receivable should be 
credited when the note is disposed of. The following illustrates the form of your entry. 


X 3 


' * * ' 


4£o 




No. 74 March 24 J. S. Sumner has paid his note due to-day, $250. Entry similar to 
that for the preceding transaction. 

No. 75 March 24 You have paid your note of the 19th iRst., in favor of Kidder & Hill, 
$975. 

B.P.16. — Debit Notes Payable with amounts given in payment of notes issued by the 
business (;previously entered to the credit of Notes Payable). 

You have paid cash and received the note. As Notes Payable was credited when the note 
was issued, it is evident that Notes Payable should be debited when the note is paid. The fol¬ 
lowing illustrates the form of the entry. 



No. 76 March 24 You have paid your note in favor of Warner & Freeman, $210. Entry 
similar to that for the preceding transaction. 

No. 77 March 26 Received of E. H. French & Co., to apply on account, their note dated 
March 25 for $200. 

No. 78 March 26 Transfer by indorsement A. H. Warren’s note of the 21st inst., for 
$306, to H. S. Clough & Co. to apply on account. 

B. P. 17. — Credit Notes Receivable , at face value, with notes of others transferred to 
creditors on account, or discounted at a bank. 


MARCH 


35 


Instead of keeping A. H. Warren’s note until it becomes due, you have given it to H. S. 
Clough & Co., to apply on account, and they agree to accept it at its face value. You have 
paid H. S. Clough & Co. on account; hence they should be debited. (B. P. 7.) You have, for 
value, disposed of a note previously entered to the debit of Notes Receivable; hence Notes 
Receivable should be credited. The value you have received is equivalent to cash received 
from A. H. Warren and transferred to H. S. Clough & Co. The following illustrates the form 
of the entry. 


2-^r 

73 . 3 737/^^33 



3 c o 


3 o o 


Assuming that you use a special indorsement (see Indorsements, page 30), your indorse¬ 
ment will be in the form shown below. You have indorsed the note and delivered it to H. S. 
Clough & Co.; in other words, you have negotiated the note. 




No. 79 March 26 Paid cash for clerk hire, $50; for stamps, etc., $2. 

No. 80 March 27 Gave Kidder & Hill your note, dated to-day, at 30 days, for $340, to 
apply on account. 

No. 81 March 27 William Archer & Co. paid their note of the 13th inst. in cash, $690. 
Entry similar to that for No. 74. 

No. 82 March 28 Gave the Interstate Transportation Co. cash, in payment of freight bills 
to date, $12. (B. P. 11.) 

No. 83 March 28 You have taken from the store for personal use 1 bbl. Flour at $8. 

B. p. is . — Debit the Proprietor , Personal , with the cost price of goods taken from the 
business for personal use. 





36 


ELEMENTARY COURSE 


B. P. 19. — Credit Purchases at cost price with goods taken from stock by the proprietor , or 
sold at cost price to employees. 

The student will note that when the proprietor takes goods for his personal use he is 
charged not at the usual sale price, but at the cost price. Purchases are credited, rather than 
sales, because the goods have not really been sold, but withdrawn from stock. 

No. 84 March 29 Bought of A. J. Lane invoice of March 28. Terms: On account. 300 
bu. Oats at 64^; 100 bu. Rye at SI. 10. 

No. 85 March 29 Paid F. A. Smith & Co. cash, S165, in full of account. 

No. 86 March 29 Received of Wm. Archer & Co., cash on account, SI50. 

No. 87 March 30 Bought of Rice, Miller & Co. invoice of March 28. Terms: On ac¬ 
count 30 days. 25 bbl. Flour at S7.90 per bbl.; 200 bu. Corn at 70</t per bu. 

No. 88 March 30 Sold W. A. Scott 200 bu. Oats at 76^ per bu.; 25 bbl. Flour at S9 per 

bbl. Terms: On account 30 days. 

/ No. 89 March 31 Bought of F. A. Smith & Co. invoice of March 29. Terms: On account 
30 days. 40 bbl. Flour at S7.50 per bbl. 

No. 90 Post from the journal, following previous directions. Rule all personal accounts 
which balance. 

No. 91 Check the posting. 

No. 92 Pencil foot the ledger accounts, adding March items to February footings. On the 
larger side of the ledger account, write in small pencil figures, in the explanation space, the foot¬ 
ing of that side of the account; underneath it write the footing of the smaller side, subtract, 
writing the remainder underneath, and leave these pencil figures in the ledger. Carry this re¬ 
mainder to the trial balance opposite the name of the account, and in the proper column. (See 
Cash account in model ledger, page 12 for illustration of this method of finding the balance of 
an account.) 

No. 93 When the trial balance has been approved, copy it on the page following the Feb¬ 
ruary trial balance. 


TRIAL BALANCE ERRORS 

As already explained, a trial balance is an exhibit of the balances of the open accounts in 
the ledger. (Or it may be an exhibit of the totals of the open accounts.) It is a mechanical 
device which proves that the debits and credits are equal. It does not prove that the debits 
and credits are correct, but only that they are equal. 

If the debits and credits are equal in the original entries; if the posting is correctly done; 
if the addition and subtraction is accurate, and if only accounts which balance are ruled, a trial 
balance is certain. If there is an error, it arises from one of these four sources; therefore, make 
sure that there is a debit equal in amount to each credit in the journal, that the amounts are 
correctly posted, that the calculations are accurately made, and that every ruled account has 
equal debits and credits above the ruling. There is no magic about finding trial balance errors. 
The trial balance depends upon the simple mathematical proposition of carrying equal amounts 
to each side of the ledger. The following suggestions, however, will often be found helpful. 

1 Find the exact amount of the error. It may be a single item or footing which has not 
been posted. 


MARCH 


37 


2 If the difference is 1 in any column, the mistake is usually in addition or subtraction, 
or if the difference is 9 in any column, it frequently indicates two errors in addition. If one 
column is overadded 1 and the adjacent column is underadded 1, the resulting error will be 9. 

3 If the difference is an even number, it may indicate an amount posted to the wrong 
side, which, of course, makes an error double the amount of the wrong posting. 

4 If the error is divisible by 9, there may have been a transposition of figures, and the 
quotient found by dividing the error by 9 will be the difference between the figures transposed. 
If 36 is posted 63, the resulting error will be 27. Dividing 27 by 9 gives 3, which is the differ¬ 
ence between 6 and 3. 

5 The error may be due to a misplacement, in which case the quotient found by dividing 
the error by 9 will give the number misplaced. If $5 is posted $50, the error will be $45. Di¬ 
viding 45 by 9 gives 5, the number misplaced. 

6 If the error is divisible by 99, and due to a misplacement, the sum was misplaced two 
columns. If 50^ is posted as $50, the resulting error will be $49.50, which contains 99 50 times. 

STATEMENTS 

There are two principal statements prepared from double entry books. These statements 
summarize in brief, but comprehensive form, the results of the business during the period for 
which they are prepared. It is to these statements rather than to the books themselves that 
the business man looks for his information concerning the progress and results of the business. 
It is very important that they be correct, both as to the results attained and as to the method 
of exhibiting such results. 

The Profit and Loss statement is an exhibit of the profits and losses of the business during 
the period which it covers. 

The Balance Sheet is an exhibit of the assets, liabilities, and net worth of the business at 
the time it is made. 

A profit is realized when goods increase in value, or when the selling price exceeds the cost 
price, or when income is received from investment or from services rendered. 

A loss is realized when goods decline in value, or when the cost exceeds the selling price, or 
when an expense is incurred in conducting the business. 

An Asset, or Resource, is anything of value owned by the business, including amounts due 
the business from debtors. 

A Liability is any debt or obligation which the business owes. 

A fiscal period is a business, or financial, period, at the close of which business statements 
are prepared and the books closed. It may coincide with the calendar year, but it may be for 
any desired period. 

An inventory of merchandise is the value of goods on hand, usually reckoned at the cost 
price. 

A “physical” inventory is taken by making an actual count of all the unsold goods. A 
schedule is prepared, showing the quantity, prices, and total value. 

Generally speaking, an inventory is a schedule of unsold or unused goods. In every case 
the inventory is credited to the account to which the goods were originally charged. The 
method of bringing the inventories on to the ledger will be illustrated later. 

The statements are prepared from the trial balance and the inventories. However, if the 
inventories have been entered upon the ledger, and are thus included in the trial balance, the 
statements may be prepared entirely from the trial balance, using such explanatory detail from 
the ledger as may be desired. 


38 


ELEMENTARY COURSE 


Assume the following trial balance to have been taken from the student’s ledger, Decem¬ 
ber 31. 




s~ 






V- sd>~y^<dS 

(O. ^ 

\Ofr rf. sJLott 


V'O/oAAAy 
/£> O/Ossf! (^Ao-z^y-^s Y' (3<rS 
» O^ioCeUAS Y'O/Oo^/s 

// J?. 

» *zyA. /sf. Y-g*' 

/ 2 Of: OAA 


/s 


/U J >S^Yts/^ty?^A, 'ZyA' 

/S J ^J0~AO<dS 

/J ^^OCeyiA^Aly/ Y'CEt. Zy^StyGlyt^SlY 


/ / 3 rso 
CS JSO 
I/O 

Yys 
/ zs 

/ 7 2- 

z/ 7 

J? / 7 
2 70 
2 7^ 


7*9 

L/-7f 

3U% 

3 / 7 's° 
2 7^ 
/2S 
fos 
7300 

C / 2 7 so 


1/0 

7^37 
us 

<?£ 

;// is 7 //, 7 s 7 \ 

Excluding from present consideration the proprietor’s accounts, every account on the trial 
balance shows one of four results — profit, loss, asset, or liability. Each debit balance shows 
one of two results — asset or loss. Each credit balance shows one of two results — liability or 
profit. Every balance on the trial balance must be used once on one of the two statements, 
never on both statements, since that would destroy the equilibrium between debits and credits. 

In addition to the accounts on the trial balance, there is an inventory of merchandise not 
shown by the ledger, amounting to $2718. Inventory amounts, not on the ledger, must be used 
twice, once on each statement; on one statement as a debit; on the other statement as a credit. 

The Profit and Loss Statement. — An analysis of the trial balance preparatory to making the 
profit and loss statement shows that the accounts showing profit or loss are Purchases, Freight 
and Cartage, Sales, and General Expenses. (Note how they are grouped on the trial balance.) 





MARCH 


39 


The merchandise accounts, Purchases, Sales, and Inventory, must be considered together. 
Freight and Cartage is an expense directly chargeable to Purchases. General Expenses indi¬ 
cate the items of expense which are not chargeable to any particular activity of the business, 
but to the whole business generally. 

Freight and Cartage is added to Purchases to find the gross cost of purchases. Before 
finding the profit on sales, it is necessary to find the cost of Sales. The Purchases account, 
with Freight and Cartage added, shows the total cost of goods bought. The inventory shows 
the cost of goods yet unsold. The difference, therefore, will be the cost of goods sold. 

If, now, the sales and the cost of goods sold be compared, the difference must be the profit 
on sales. 

This profit, however, has to be diminished by the loss shown by the General Expenses 
account. As there are no other losses, when this calculation is made, we shall have the net, or 
real, profit for the period. 

This information may be plainly exhibited in the following form. 






(a / % JSO 






7™ 7 




s/J- 




7ff2- 




2-7// 

S / ^ 4 



<? 63 so 





.... 


tty 

So 





Proprietorship equation: Investment+Profit =Net Worth, or Proprietorship. 
Student’s investment Dec. 1, 2500 

Less — Personal debit 40 2460 


Add: 

Net profit 867.50 


Student’s net worth Dec. 31, 3327.50 

Student’s merchandise inventory March 31 consists of the following. 

1416 bu. Corn W per bu. $991.20 

655 “ Oats 60^ “ “ 393. 

200 “ Rye $1.10 “ “ 220. 

115 bbl. Flour 7.80 “ bbl. 897. 


2501.20 


Copy the inventory in Blank No. 1, following the trial balance for March. 








40 


ELEMENTARY COURSE 


From the trial balance and inventory prepare a profit and loss statement for February and 
March, using the form of the illustrated statement, but getting the amounts from your own 
trial balance. 

The heading of the statement should be: “Profit and Loss Statement Feb. 1, 19— to 
March 31, 19— ” 

When the statement has been approved, copy it in Blank No. 1, following the record of the 
inventory. 

The Balance Sheet. — As already stated, the balance sheet is an exhibit of the assets and 
liabilities of the business at the time it is prepared. Since assets are what the business owns 
and liabilities are what the business owes, the difference between the assets and liabilities must 
be the net worth of the business. The conclusion, therefore, to be arrived at on the balance 
sheet is the net worth of the business. 

The balance sheet is based upon the following equation: 

Assets — Liabilities = Net Worth, or Proprietorship. 

Refer to the trial balance shown in the text from which the illustrative profit and loss 
statement was made. 

In addition to the inventory of merchandise, every debit balance on the trial balance not 
used on the profit and loss statement shows an asset. 

Cash account always shows an asset, since it is impossible to pay out more cash than has 
been received. Notes Receivable account always shows a debit balance, if any, and indicates 
the value of the notes owned by the business. It is always an asset. Accounts Receivable (the 
collective name for personal accounts owing to the business) always show debit balances, and 
are assets, being the amounts owned by the business, but in possession of those who owe the 
business. 

Notes Payable account always shows a credit balance, if any, and is always a liability, 
being the amount the business owes on its outstanding notes. Accounts Payable (the collective 
name for personal accounts owed by the business) always show credit balances, and are liabil¬ 
ities, being the amounts the business owes to others. 

The Proprietor’s personal account is subject to the same interpretation as any other per¬ 
sonal account, but its disposition depends upon the wish of the proprietor. He may direct that 
it stand open, as other personal accounts, or he may direct that it be closed into his capital 
account at the close of a business period. In this set it is to be so closed. 

The Capital account is a liability, but differing somewhat from the other liabilities. The 
proprietor’s claim is subordinate to the claims of the other creditors. 

The proprietor’s capital account, and his personal account are withheld from the balance 
sheet until the conclusion. If they are used with the other accounts, the result will be net 
profit instead of net worth, and since it is desired to show net worth, the proprietor’s accounts 
are used at the conclusion of the statement. 

The non-ledger inventory has been used on the profit and loss statement as a credit; that 
is, it was subtracted from the Purchases debit. On the balance sheet it must be used as a 
debit; otherwise the debits and credits would not be equal on the two statements, and they 
would not agree. 

The assets shown on the trial balance are Cash, Notes Receivable, and Accounts Receiv¬ 
able. The liabilities shown on the trial balance are Notes Payable and Accounts Payable. 


MARCH' 


41 


These assets and liabilities should be arranged in the following form: 


tfT 3 / 

^^f. ^^rcCs^e/ Y' ((^*t? 


Gp'. 7/~ k^A^^sc3z^ V- (3*7? 

773ms (3^L^>(3 ^ls ^ (3cr? 
73^ix?r7^s v* 33(33 

^^TT^es^si*' 33slsO-rdS 

's3t7-3zL3 / 33-*4^£~&3dS 


ajs-^ 

73. 33?d3si7^^ 

33. >^3m3st3zs (3 *t? 

9^ ( 3 *t? 

33cM' 

\z*3^?~^s& , 3 / ' ~^7^t(scis3~33csG-^?~d? 

'7z^33^?^Jls 

\z37?2s^-^<d?C^ 

\3g&<?**s*^<>£ • 

tfsCsCstT^^^ o&*3*(£ 

33&Ldy 


TZtU 73?^u>3? 


// 3 fJO 

z 7 / r 

4~Tf. 


3&7 
4^7 s 
270 
/ 72 

/ 23 
4o 
2 7 S 

in 


tos 

3 42 
/ 2s 

2 73 
3 / 7W0 
7f<7 
47 r 


Z30 o 


4o 


2 46 O 

? 6 ? 7 


30 

33 2 7SO 


33Z7SO 


C, 437 


3/2 730 


3 3 2730 


33 2 730 




























42 


ELEMENTARY COURSE 


Note the agreement between the two statements. This agreement proves that the equal¬ 
ity of debits and credits has been maintained. It does not prove that the statements are cor¬ 
rect. If, for example, a loss item is used as an asset (both debits), or a liability is used as a 
profit (both credits) this agreement would not be affected. If the statements are correct, they 
will agree; but they may agree when they are not correct. 

From your trial balance and inventory prepare a balance sheet as of March 31, using the 
form of the illustrative balance sheet, but getting the details from your own trial balance and 
inventory. The heading for the balance sheet should be “Balance Sheet, March 31, 19—.” 

When the balance sheet has been approved, copy it in Blank No. 1, following the profit 
and loss statement. 


CLOSING THE LEDGER 

At the close of a fiscal period the inventories are entered upon the ledger, and the accounts 
showing losses or gains are closed into a summary account called Profit and Loss, which shows 
the amounts and the sources of all profits and all losses of the business, and which, in turn, is 
closed into the proprietor’s account. The purpose of closing is to make the ledger show the 
true condition of the business at the time of closing and to make possible the keeping of the 
losses and gains of each period distinct from those of every other period. 

It is a fundamental principle of bookkeeping that all entries, except balancing entries, 
reach the ledger by the process of posting. It is necessary now to make closing entries in the 
journal, which, when posted, will close the ledger. 

Only the accounts showing losses or gains are closed. The data for making the closing 
entries is found on the profit and loss statement. It must be followed in detail. 

Refer now to the illustrative profit and loss statement. The first entry will be for the pur¬ 
pose of placing the inventory on the ledger. Since the inventory is an asset, it must appear on 
the debit side of the ledger. 

B. P. 20. — Debit Inventory , at closing, with the value of goods on hand. 

B. P. 21. — Credit Purchases, at closing, with the value of goods on hand. 

The purpose of this entry is to separate the Purchases account into two parts, merchandise 
sold and merchandise on hand. When the entry is posted, the Purchases account will show on 
the debit side the cost of all merchandise purchased; on the credit side, the cost of merchandise 
on hand. The difference between the two sides will show the cost of goods sold, exclusive of 
Freight and Cartage. Entering the inventory on the credit side of Purchases has the same 
effect as deducting the inventory from Purchases on the profit and loss statement. (If it is 
desired to deduct from one side of a ledger account, it is accomplished by adding to the other 
side.) 

On the Profit and Loss statement Freight and Cartage is added to Purchases to show gross 
cost of purchases, and the same process is required on the ledger. 

3. P. 22. — Debit Purchases, at closing, with the cost of Freight and Cartage. 

Since Freight and Cartage is to be added to Purchases, it should no longer stand open on 
the ledger. 

B. P. 23. — Credit Freight and Cartage, at closing, with the balance shown by that account. 

The cost of sales was deducted from sales in order to get the gross profit on sales. It must 
be deducted on the ledger also by making an entry on the debit side. 

B. P. 24. — Debit Sales, at closing, with the cost of goods sold. 


MARCH 


43 


B. p. 25. — Credit Purchases, at closing, with the cost of goods sold. 

When these entries have been made and posted, the Purchases account and the Freight 
and Cartage account will balance, and the difference between the two sides of the Sales account 
will show the gross profit on sales, exactly as on the profit and loss statement. 

The Sales account will now be closed and Profit and Loss account opened. 

B. P. 25 .— Debit Sales, at closing, with the gross profit on sales. 

b.p.27. — Credit Profit and Loss, at closing, with all profits. 

The only other account showing a profit or a loss is General Expenses. This amount was 
subtracted from the gross profit on sales in the profit and loss statement, and must be sub¬ 
tracted from the profit as shown in the ledger Profit and Loss account. 

B. P. 28. — Debit Profit AND Loss, at closing, with all losses. 

B. P. 29. — Credit General Expensbs, at closing, with the loss shown by that account. 

The Profit and Loss account will now show the net profit, which is closed into the Pro¬ 
prietor’s personal account. The profit belongs to the proprietor, and he can draw it out of the 
business, or add it to his investment, as he may choose. 

B. P. 30. — Debit Profit AND Loss, at closing, with the net profit. 

B. P. 31. — Credit the Proprietor's Personal account at closing, with the net profit; or, if 
there are two or more proprietors, credit each with his share. 

Assuming that the proprietor decides to let the profit remain in the business as an addi¬ 
tional investment, an entry is required to transfer the balance of the personal account into the 
capital account. Since the personal account now contains a debit of $40 and a credit of $867.50, 
it will be necessary to debit the personal account and credit the capital account for the differ¬ 
ence, $827.50, in order to close the former into the latter. 

Note the following journal entries which are required for the foregoing. 

Note also the ledger accounts affected by the closing entries. Trace the entries to the 
respective accounts, and note carefully the method of ruling. 

Make journal entries to close your ledger for March. Follow the form of the illustrative 
closing entries, but get the details from your own profit and loss statement for March 31. 

Post the closing entries to the ledger and rule the accounts. Follow the form of ruling 
shown in the illustrations. Note how the ruling of these accounts differs from the ruling of a 
personal account. 


44 


ELEMENTARY COURSE 


3 /, 



2-7 / t 


VS 


S / & V 


<7 £3 SO 








7 c 


<5* 6 7 s~o 




SYcr' 




- 


fl 7 so 



7.7/ r 


vs 


S / £ V 


<76, 3 SO 


*k 


rc 7 so 


f2 7 SO 
























MARCH 


45 






















































































































46 


ELEMENTARY COURSE 




*1- 


3 / (3o~ds/4 S’ 7 6 4 
“ ~7d*<?^L4- * 7 6 3 so 


'?- 


6/2 7 so 


s 

0 

<73 6 so 

7 

/ 

/ O 2 7 so 

/3 

2 

3/4 

/ r 

2 

3 0 0 

20 

2 

6 fs 

24 

3 

720 

2S 

3 

i 9? ] 

27 

3 

s 7s 

2-7 

3 

7 7 0 so 

(0 / 2 7 so 


'?~ 

At/ 3/ 




6/ 2 7 / f 


'9~ 


/ 
X 
/% 
2,r 




/ 

/ 

2 

3 


.23 
/s 

2 7 so 
30 so 

? t 


' 9 - 

0&escs3/ 


?6 


7* 


76 


'9- . * 

dd^c/. \J/ dJy&srzs £7 

" dLe4- ddu^ZX 






3, 


'ZedUZbdS 4 7 6 3 so 


7 6 3 so 












MARCH 


47 


Ruling, Closing, and Balancing Accounts. — Personal accounts, Notes Receivable account, 
and Notes Payable account are ruled when they balance. Such ruling does not affect the form 
or content of the account, but simply indicates that all transactions above the ruling have been 
completed. 

Accounts showing a loss or a gain are closed at the end of a fiscal period. Both the form 
and the content of the accounts are changed. By closing these accounts, the profits and losses 
for each succeeding period are kept distinct. 

Accounts are balanced for the purpose of summarizing them, and showing the result in a 
single statement. By balancing an account the form is changed, but not the content. Ac¬ 
counts may be balanced at any time; they should be balanced before they become too long; 
they must be balanced when they are transferred from one page of the ledger to another page. 

The Cash account should be balanced frequently, and the Proprietor’s account should be 
balanced at closing time. 

The balanced accounts are merely re-stated for convenience in reading. 

Note that the entry to balance is written in red ink. The reason is that the entry is not a 
posted entry, but is made directly on the face of the ledger for the purpose of balancing the 
account. When the account is thus balanced, the ledger is unbalanced, and care must be used 
to write the balance on the opposite side of the account. The red ink entry serves notice to 
the bookkeeper that the entry in red must be duplicated in black on the opposite side of the 
ruled account. 

Balance your Capital account and your Cash account for March, following the illustra¬ 
tions as to form, but using the amounts in your ledger. 


48 


ELEMENTARY COURSE 


C^ulJis 







































































































march 


49 


PROOF TRIAL BALANCE 

A proof trial balance is a trial balance taken after the ledger is closed. It is no different in 
form from the trial balance already taken, but the closed accounts will not appear upon it. 
One new account — Inventory — will appear on the proof trial balance. 

The proof trial balance is taken in order to make sure that the equality of debits and cred¬ 
its has been maintained during the process of closing and balancing accounts. It proves that 
the ledger is in balance for the beginning of the new fiscal period. It is a precaution which no 
careful bookkeeper will omit. 

Take a proof trial balance from your ledger. 

When your proof trial has been approved, copy it, following the balance sheet. 

Submit your February and March work to your teacher for inspection and final approval. 

REVIEW QUESTIONS 

1 Define buying on account. Define selling on account. 

2 When are personal accounts credited? When debited? 

3 Give directions for checking the posting. What is the object? 

4 Why should Freight and Cartage be closed into Purchases? 

5 What is the purpose of the Proprietor, Personal account? 

6 What is a promissory note? 

7 What are Notes Receivable? 

8 When should Notes Receivable be debited? When credited? 

9 What are Notes Payable? 

10 When should Notes Payable be credited? When debited? 

11 Which side of the Notes Receivable account is always the larger if there is a difference? 

12 When will the Notes Receivable account balance? 

13 Which side of Notes Payable account is the larger if there is a difference? 

14 Define indorsement. 

15 What is a trial balance, and what does it prove? 

16 What is a Profit and Loss statement? A Balance Sheet? 

17 Define account, loss, profit, asset, liability, inventory. 

18 Why should the inventory of merchandise be used in the Profit and Loss Statement? 

19 What account should be credited for goods taken from stock at cost? 

20 What price is usually used in calculating the inventory? 

21 What information should the Profit and Loss statement contain? 

22 Name four classes of accounts, with respect to titles. 

23 How is the net worth of a business determined? 

24 What accounts are closed at the end of a fiscal period? 

25 What is a fiscal period? 

26 Distinguish between balancing an account and closing an account. 

27 What is the purpose of closing the ledger? 

28 In what color should balancing entries be written? Why? 

29 What is the purpose of the Profit and Loss account? 

30 Explain the method of closing the ledger by journal entries. 

31 Into what account is the Profit and Loss account closed? 

32 State the proprietorship equation. 

33 What is a proof trial balance? 

34 What is the distinction between a trial balance of totals and a trial balance of balances? 


50 


ELEMENTARY COURSE 


SUMMARY OF BOOKKEEPING PROCEDURE FOR DEBITING, CREDITING, AND 

CLOSING ACCOUNTS 

While the following do not cover every transaction which might arise, they are sufficiently 
comprehensive for the purposes of an introductory text. 

Cash 


1 Debit Cash with all cash received. 


4 Credit Cash with all cash paid. 


The debit balance of the account shows cash on hand, and is an asset. 


Proprietor’s Capital Account 

Debit the Proprietor’s Capital account when any 2 Credit the Proprietor’s Capital account with his 
part of his investment is withdrawn. original investment and all subsequent investments. 

A credit balance in this account shows the net worth of the proprietor. A debit balance 
shows his net insolvency. 

General Expenses 

3 Debit General Expenses with all expenses of the 29 Credit General Expenses, at closing, with the 
business, except those for which a separate account is loss shown by that account, 
kept. 

Purchases 


5 Debit Purchases with the cost price of all mer¬ 
chandise purchased. 

22 Debit Purchases, at closing, with the cost of 
Freight and Cartage. 

Debit Purchases, at closing, with the inventory of 
goods on hand, if any, at the beginning of the period. 


19 Credit Purchases at cost price with goods taken 
from stock by the proprietor, or sold at cost price to 
employees. 

21 Credit Purchases, at closing, with the value of 
goods on hand. 

25 Credit Purchases, at closing, with the cost of 
goods sold. 

56 Credit Purchases with goods returned by the 
business to the seller (unless a Returned Purchases ac¬ 
count is kept). 

58 Credit Purchases with the cost of goods dam¬ 
aged or destroyed by fire. 


Personal Accounts (with Creditors) 


7 Debit a Person with cash or notes given to him 
on account. 

55 Debit a Person with allowances made to the 
business for returned purchases, damaged goods, ad¬ 
justed claims, etc. 


6 Credit a Person with the purchase price of mer¬ 
chandise purchased from him. 

Note: — Cash purchases may be handled without 
passing through the personal account, depending upon 
the system used in any given case. 


A credit balance in a personal account shows an amount owed by the business, and is a 
liability. 


Personal Accounts (with Customers) 


8 Debit a Person with the sale price of merchandise 
sold to him. 

Note: — Cash sales may be handled without pass¬ 
ing through the personal account, depending upon the 
system used in any given case. 


10 Credit a Person with cash or notes received 
from him on account. 

53 Credit a Person with allowances made by the 
business for returned sales, damaged goods, adjusted 
claims, etc. 


A debit balance in a personal account shows an amount due the business, and is an asset. 


SUMMARY OF BOOKKEEPING PROCEDURE 


51 


Sales 

24 Debit Sales, at closing, with the cost of goods 9 Credit Sales with the sale price of all merchandise 
sold. sold. 

26 Debit Sales, at closing, with the gross profit on 
Sales. 

52 Debit Sales with the sale price of goods returned 
by customers (unless a Returned Sales account is 
kept). 


Freight and Cartage 


11 Debit Freight and Cartage with the cost of 23 Credit Freight and Cartage, at closing, with the 
freight, cartage, express, and postage on merchandise balance shown by that account, 
purchased. 


Proprietor’s Personal Account 


12 Debit the Proprietor’s Personal Account with 
all cash withdrawn for personal use. 

18 Debit the Proprietor’s Personal account with 
the cost price of goods taken from the business for 
personal use. ' 

68 Debit the Proprietor’s Personal account, at clos¬ 
ing, with the net loss, or, if there are two or more pro¬ 
prietors, debit each with his share. 


31 Credit the Proprietor’s Personal account, at 
closing, with the net profit; or, if there are two or 
more proprietors, credit each with his share. 

41 Credit the Proprietor’s Personal account with 
monthly salary allowance, unless a separate salary ac¬ 
count is kept. 

60 Credit the Proprietor’s Personal account with 
any expenses of the business paid from his private 
funds. 


The balance of the account may be transferred to the proprietor’s capital account; other¬ 
wise, it is treated like any other personal account. 


Notes Receivable 


15 Credit Notes Receivable with amounts received 
in payment for notes of others (previously entered to 
the debit of Notes Receivable). 

17 Credit Notes Receivable at face value with 
notes of others transferred to creditors on account, or 
discounted at bank. 

The debit balance of this account shows the face value of notes on hand, and is an asset. 

Notes Payable 

16 Debit Notes Payable with amounts given in 14 Credit Notes Payable at face value with all 
payment of a note issued by the business (previously notes made and issued by the business, 
entered to the credit of Notes Payable). 

The credit balance of the account shows the amount owed by the business on its outstand¬ 
ing notes, and is a liability. When all notes are paid, the account must balance. 


13 Debit Notes Receivable, at face value, with all 
notes made by others and received by the business. 


Merchandise Inventory 

20 Debit Inventory at closing, with the value of 64 Credit Inventory at closing, with the inventory, 
goods on hand. if any, at the beginning of the period. 

The debit balance of the account shows the book value of merchandise on hand, and is an 

asset. 

The merchandise inventory may be handled through the Purchases account. 


Profit and Loss 

28 Debit Profit and Loss, at closing, with all losses. 27 Credit Profit and Loss, at closing, with all profits. 

30 Debit Profit and Loss, at closing, with the net 69 Credit Profit and Loss, at closing, with the net 

profit. l° ss - 


52 


ELEMENTARY COURSE 


Discounts on Purchases 

45 Debit Discounts on Purchases, at closing, with 32 Credit Discounts on Purchases with all dis- 
the profit shown by that account. counts allowed to the business for prompt payment of 

invoices. 

Discounts on Sales 

33 Debit Discounts on Sales with discounts allowed 49 Credit Discounts on Sales, at closing, with the 

to customers for prompt payment of invoices. loss shown by that account. 

Furniture and Fixtures 

34 Debit Furniture and Fixtures with the cost of 62 Credit Furniture and Fixtures at cost price with 
furniture and equipment purchased for use in con- equipment sold, destroyed, or otherwise disposed of. 
ducting the business. 

The account will balance if all the equipment is disposed of; otherwise, the debit balance 
shows the cost of furniture and fixtures on hand, and is an asset. 

Note: — If the account is credited with depreciation, the balance will show the book 
value of the furniture and fixtures on hand. 

Interest on Notes Payable 

35 Debit Interest on Notes Payable with all inter- 48 Credit Interest on Notes Payable, at closing, 
est paid on notes, whether paid in advance or at ma- with the loss shown by that account. 

turity. 

When there is interest accrued, or interest prepaid on notes payable, the account must be 
adjusted before closing so that it will show actual cost of interest during the period. 

Real Estate 

36 Debit Real Estate with the cost of buildings and 63 Credit Real Estate at cost price with real estate 
lands, and with all expenses incurred in obtaining title sold, destroyed, or otherwise disposed of. 

thereto. 

The account will balance if all the property is disposed of; otherwise, the debit balance 
shows the cost of real estate on hand, and is an asset. 

Insurance Prepaid 

37 Debit Insurance Prepaid with cost of insurance 42 Credit Insurance Prepaid, at the end of a busi- 

placed upon real estate, stock of goods, or other prop- ness period, with the cost of insurance during that 
erty. period. 

The balance of the account, after adjustment, shows the amount of insurance premiums 
prepaid, and is an asset. 

Real Estate Expenses 

38 Debit Real Estate Expenses with the expenses 47 Credit Real Estate Expenses, at closing, with 
due to the maintenance of real estate used for business the loss shown by that account. 

purposes. 

Interest on Notes Receivable 

44 Debit Interest on Notes Receivable, at closing, 39 Credit Interest on Notes Receivable with inter- 
with the profit shown by that account. est received on notes, loans, and overdue accounts. 

When there is interest accrued on notes receivable, the account should be debited or cred¬ 
ited with such an amount as will make the account show the interest earned during the period. 


SUMMARY OF BOOKKEEPING PROCEDURE 


53 


Selling Expenses 

40 Debit Selling Expenses with all expenses incur- 46 Credit Selling Expenses, at closing, with the loss 
rod directly in the sale of merchandise, including wages shown by that account, 
of clerks, advertising, salesmen’s salaries, traveling ex¬ 
penses, etc., unless separate accounts are kept for such 
expenses. 

54 Debit Selling Expenses with freight prepaid on 
Sales (unless a separate Freight-Out account is kept). 

Interest Prepaid on Notes Payable 

43 Debit Interest Prepaid on Notes Payable, at the 61 Credit Interest Prepaid on Notes Payable, at 
end of a business period, with the amount of interest the end of a business period, with the decrease of pre¬ 
prepaid on our own notes. paid interest during the period. 

If there is an increase in the amount of interest prepaid, the account would be debited for 
such increase. The balance of the account, after adjustment, shows the amount of interest 
prepaid, and is an asset. 

Discount on Notes Payable 

65 Debit Discount on Notes Payable, at closing, 50 Credit Discount on Notes Payable with all dis- 
with the profit shown by that account. counts earned by prepayment of Notes Payable. 


Discount on Notes Receivable 


51 Debit Discount on Notes Receivable with the 
amount charged by a bank for discounting notes re¬ 
ceivable for the business. 

Fire 

57 Debit Fire Loss with the cost of property dam¬ 
aged or destroyed by fire. 


66 Credit Discount on Notes Receivable, at closing, 
with the loss shown by that account. 


Loss 

59 Credit Fire Loss with the amount realized from 
the sale of damaged goods, or other property, or re¬ 
ceived from insurance in settlement of fire losses. 

67 Credit Fire Loss, at closing, with the loss shown 
by that account. 


Good Will 

Debit Good Will with the amount paid for a busi- Credit Good Will with the amount written off to 
ness in excess of the net worth as shown by the tangi- Profit and Loss from time to time, 
ble assets and liabilities. 

The debit balance of the account shows the book value of Good Will, and is an asset. 


54 


ELEMENTARY COURSE 


Exercise 1 

From the following trial balance, prepare a Profit and Loss statement and a Balance Sheet 
on loose paper. 

The inventory of merchandise is $2316.50. 

Trial Balance, Nov. 30, 19— J. H. Adams 


J. H. Adams, Capital... 
J. H. Adams, Personal. 

Cash.,. 

Purchases. 

Freight and Cartage. 

Sales. 

General Expenses. 

Notes Receivable. 

C. H. Barber. 

A. E. Carter. 

R. L. Thomas. 

Notes Payable. 

C.H. Little. 

T. H. O’Neil. 

S. T. Wilson. 

Ellis & Thompson. 


$4000. 

$175. 

1670.80 

6780.90 

115. 

5369.75 

275.23 

780. 

176.95 

476.85 

972.60 

875. 

369.80 

463.95 

169.83 

175. 


$11423.33 $11423.33 


When the statements have been approved, make the closing entries on loose paper. 

Credit the Proprietor’s Personal account with the gain; then close the Personal account 
into the Capital account, as in the closing entries for March. 


Exercise 2 

Prepare Profit and Loss Statement, Balance Sheet, and closing entries. 
Inventory, $1215.63. 


Trial Balance, Dec. 31, 19— C. R. Loveland 


C. R. Loveland, Capital. 

Cash. $4562.80 

Purchases. 5962.75 

Freight and Cartage. 83.90 

Sales... 

General Expenses.. 296.80 

Notes Receivable. 500. 

Accounts Receivable. . . 2100.50 

Notes Payable... 

Accounts Payable_ l . 


$6000. 


6216.72 


215. 

1075.03 


13506.75 13506.75 


In the above trial balance, personal accounts have been listed under their collective titles 
— Accounts Receivable, and Accounts Payable. This change will not affect the Balance Sheet, 
except to shorten it. 

No personal account has been opened for the Proprietor; therefore the Profit and Loss 
account will be closed directly into the Capital account. 



































SUMMARY OF BOOKKEEPING PROCEDURE 


55 


Exercise 3 

The transactions thus far recorded have required only a simple journal entry, having one 
debit and one credit. Many transactions require compound entries, having two or more debits 
or credits. Debits and Credits must be equal in amount , not in the number of items. 

Journalize the following transactions: 

Jan. 1, 19— Sold F. E. Clark 25 bbl. of beef at $16 per bbl. Received in payment, his 
30-day note for $250; cash, $150. 

Make two entries, one for the sale and one for the payment. 

The following illustrates the form of the entries required. 


fij 




{//*?. 


Jl&^ny 


/. /<?- 




(3^uy£y 


'yy^ri^yLey 


s 


t/yo 


/s o\ 
3o o\ 


4431? 


4-J-O 


If it is not desired to enter the transaction in the account of F. E. Clark, then the entry 
may be in the form shown below. The student will observe that the debit to J. M. French in 
the first entry is cancelled by the credit to J. M. French in the second entry, and that the deb¬ 
its and credit remaining are as shown in the third entry. Entries one and two are preferred. 




/yo 



o 



4431? 





3 a J/jr. 

j i„ 


2 Sold Albert Stewart 15 bbl. Apples at $6 per bbl. Received in payment cash, $55; note 
at 10 days, $35. 

3 Sold J. D. Lawrence 55 bbl. Flour at $7 per bbl., 25 bbl. Beef at $16.50 per bbl. Re- 
ceived in payment cash, $275, and his 30-day note for the balance. 

4 Sold D. C. Schneider 50 bbl. Apples at $7 per bbl., 25 bu. Potatoes at $1.60 per bu. 
Received in payment his 30-day note, $100; John Smith’s 10-day note, $80; cash, $210. 

Debit Notes Receivable separately for each of the two notes. 

5 Frank Miller, not having sufficient funds with which to pay his 6-month note for $1000 
which you hold, and which is due to-day, arranged with you to renew one-half the note for 30 















56 


ELEMENTARY COURSE 


days. Consequently, he gave you, for his old note, $500 cash and a new note for $500. (B. P. 
1, 13, and 15.) 

6 Bought of Marion Douglas invoice of Flour, dated Jan. 4, $1750. Gave in payment 
cash, $875, and your 60-day note for the balance. 

8 Bought of Henry Lindlinger invoice of merchandise, $347.50. Gave him in payment 
cash, $147.50, and your 30-day note for $200. 

9 Sold Benjamin D. Collins 5 hf. chests Japan Tea, 375 lb., at 30^ per lb.., 10 mats Java 
Coffee, 750 lb. at 25^ per lb. Terms: Cash. 

9 Received of Benjamin D. Collins cash, as follows: To pay for invoice of this date, $300; 
to pay his note in our favor due to-day, $300; to pay balance due on his account, $150. 

Debit cash for the total amount received. Credit Collins for the amount of the invoice 
plus the amount paid on account. Credit Notes Receivable for the face of the note. 

10 Bought of John Hamilton invoice of Apples, $2000. Gave in payment John Smith’s 
note for $500; your 60-day note for $300; cash $1200. (B. P. 17, and 14.) 

11 Sold Norris Bros. 1000 bu. Wheat at $1 per bu. Received in payment your note, now 
due, for $500; John Brown’s note for $475; and cash, $25. 

12 Student (the business) owes Henry Nussbaum $300, on account. Nussbaum also holds 
Student’s note for $500. Both amounts are due. Student pays the note and the account, using 
cash from the business, $700, and from his private funds, $100. 

Do not charge Nussbaum’s account for the note. (B. P. 16.) Using private funds to pay 
debts owed by the business is equivalent to putting those funds into the business. (B. P. 2.) 

Exercise 4 

James C. Carter invested $12000 in a certain business. During the month of January he 
purchased the following invoices of goods. 

Jan. 1, $4000; Jan. 3, $1185.68; Jan. 4, $2800; Jan. 8, $1500; Jan. 15, $673.50; Jan. 23, 
$568.50. 

The sales were as follows: Jan. 4, $850; Jan. 5, $1020; Jan. 6, $716.50; Jan. 11, $825; 
Jan. 13, $1050.75; Jan. 17, $400; Jan. 18, $348.50; Jan. 23, $193.75; Jan. 29, $815.38; Jan. 
31, $1300. 

The following amounts were charged to General Expenses: Jan. 3, $63; Jan. 3, $250; 
Jan. 7, $115; Jan. 14, $115; Jan. 21, $115; Jan. 22, $20.80; Jan. 29, $115; Jan. 30, $75.60. 

The following amounts were charged to Freight and Cartage: Jan. 15, $175.83; Jan. 30, 
$163.92. 

The inventory at the end of January was $5227.68. 

On loose ledger paper, open the following accounts: James C. Carter, Capital; Purchases, 
Freight and Cartage, Inventory, Sales, General Expenses, and Profit and Loss. 

Record the above items in the proper accounts, prepare a Profit and Loss statement, make 
closing entries and post, ruling the closed accounts. 

Close the Profit and Loss account directly into the Capital account, since no Personal ac¬ 
count is opened for the Proprietor. 

It is impossible to prepare a Balance Sheet for this problem, since the assets and liabilities 
are not stated. 

Balance the Proprietor’s account. 

Exercise 5 

The purchases of a certain merchant during the year 19— were $45160.50; the sales for the 
same period were $43733.33. The inventory at the close of the year was $12360.50. 


SUMMARY OF BOOKKEEPING PROCEDURE 


57 


Required: 

(a) The cost of goods sold. 

( b ) The gross profit on sales. 

(c) The rate per cent of profit on sales. 

(i d ) The rate per cent of profit on cost of sales. 

The rate of profit is calculated both on sales and on cost of sales, depending upon the prac¬ 
tice of the business. If the per cent of profit on cost of sales is desired, the cost of goods sold is 
the base, and the rate is found by dividing the profit by the cost of sales. If the per cent of 
profit on sales is desired, the sales is the base, and the rate is found by dividing the profit by 
the sales. Do not use the gross cost of purchases to find the rate of profit, since the profit is 
not on the goods bought, but on the goods sold. 

Carry the result of the percentage calculations to four decimal places, for example, 94.56, 
and state it thus: 94.56%. 

Exercise 6 

Inventory Jan. 1, $36000. Purchases during the year, $145000, of which goods worth 
$2500 were returned. Sales, $174500, of which goods worth $900 were returned by customers. 
The inventory at the close of the year was $49300. 

Required: 

(a) Net purchases. 

(i b ) Net sales. 

(c) Cost of goods sold. 

(d) Gross profit on sales. 

(e) Rate of profit based on cost of goods sold. 

(/) Rate of profit based on sales. 

Use the following form to find the results required from which to make the calculations. 

Sales $. 

Less — Returned Sales . 


Net Sales 

Deduct — Cost of Goods Sold: 
Inventory, Jan. 1 
Purchases 

Less — Returned Purchases 


Net Purchases . 

Total Cost of Goods in Stock During 

the Year $. 

Less — Inventory, Dec. 31 . 

Cost of Goods Sold . 

Gross Profit on Sales $. 

Note that the inventory at the beginning of the fiscal period is added to Purchases made 
during the year, since the initial inventory becomes a part of the purchases immediately at the 
beginning of the new period. The inventory at the close of the fiscal period is deducted be¬ 
cause those goods have not entered into the cost of goods sold. 



















58 


ELEMENTARY COURSE 


CASH RECEIPTS 



On loose ledger paper, set up the following accounts: Student, Capital, 6 lines; Cash, 10 
lines; Purchases, 10 lines; Freight and Cartage, 4 lines; Sales, 10 lines; General Expenses, 6 
lines; Notes Receivable, 5 lines; James Thompson, 5 lines; Richard White, 5 lines; Notes 
Payable, 5 lines; John Adams, 5 lines; Henry Brown, 5 lines. 

Record the following transactions in the proper accounts, and take a trial balance. 

April 1, Student invested $5000 cash in a certain business. 

2 Paid rent for April, $150. 

3 Bought merchandise for cash, $2030.60. 

4 Bought merchandise for cash, $1560.70. 

5 Sold merchandise for cash, $1600. 

6 Bought merchandise on account, from John Adams, $1700. 

8 Sold merchandise for cash, $693.50. 

8 Gave John Adams 30-day note in payment of invoice of the 6th. 

9 Sold on account, to James Thompson, merchandise, $412.50. 

10 Sold on account, to Richard White, merchandise, $512.60. 

11 Received 20-day note from James Thompson for invoice of the 9th. 

12 Bought on account, from Henry Brown, merchandise, $316.50. 

12 Paid cash for stationery and office supplies, $25.60. 

14 Sold on account, to James Thompson, merchandise, $856.75. 

15 Sold merchandise for cash, $375. 

16 Bought from John Adams, on account, merchandise, $163.50. 

17 Bought merchandise for cash, $423.50. 

18 Sold on account, to Richard White, merchandise, $419.50. 






































APRIL 


59 


CASH PAYMENTS 


DATE 

L,E 

ACCOUNT DEBITED 

explanation 

1 

CASH CR. 

TOTAI 

i 

/?- 

2- 






|i ■■■ - 






2-/2- 

2 f o o 





" 


(3cn / 

^-2/2 S~ 

/ & 0 o 





c 




720 





7 




so 





// 




6 





/z 




2-/0 





/s 




S 

<22- 




" 




2 <?s 





/V 




C, //// 





/S 




/ 3 





€t 



4^/jT 

3J2 

7^ 




ft 




C r ? y 

~7 l 

t P? f 

77 


// 






? qijg / 

a ,r 








\/0 2-f / 

2S 







: - 




BOOKS INTRODUCED IN APRIL TRANSACTIONS 

THE CASH BOOK 

The cash book, or cash journal, varying in form according to the business for which it is 
designed, contains the record of all cash transactions of any business. 

Cash is debited when the amount received is entered in the Cash Dr. column of Cash Re¬ 
ceipts. The name of the account producing the cash is credited when recorded in the Account 
Credited column of Cash Receipts. (See illustration, page 58.) 

Cash is credited when the amount paid is entered in the Cash Cr. column of Cash Pay¬ 
ments. The name of the account for which cash is paid is debited when recorded in the 
Account Debited column of Cash Payments. (See illustration, page 59.) 

Each page of the cash book, therefore, contains equal debits and credits. 

The difference between the totals of the Cash Dr. and the Cash Cr. columns of the cash 
book shows the cash balance. 

When taking a trial balance, if no Cash account is kept in the ledger, the Cash balance is 
entered direct from the cash book upon the trial balance. 

Exercise 8 

Having made proper cash book headings on a sheet of journal paper, enter all cash trans¬ 
actions for February, and balance the cash book as shown in the above illustration. Con¬ 
tinue the entries for March and balance the cash book again at the end of March. 









































00 


ELEMENTARY COURSE 


THE SALES JOURNAL 

The sales journal is designed to furnish a summary record of all merchandise sold. The 
details, as to items and prices, are omitted, because that information may be obtained from 
the duplicate invoices, or from a copy of the order. However, if there is no other complete 
data with regard to the prices and items, the sales book must contain such information. The 
following model illustrates a simple form of sales journal. 


SALES JOURNAL 


DATE L.P. 

TO WHOM SOLD 

ADDRESS 

TERMS 

SALES NO. 

SALES OR. 

- 

/ 


7f2- 


/ 

2 /2/0 



3 

( 3 . 



2 

/ ?0 



3 



//o 

3 

2/P7 

30 


7 




V 

/ 2-PS 



/2- 



7-/30 

3 

3 / / 

73 


77 

Y <3e3 

/A/ 

^//o 

7 

7A/S 



7/ 



*/cS 

7 

37 o 



77 




r 

3 f 7 

30 


2-7 

2 ^. 


Vo'/so'/t. 

7 

323 



3a 





2/3/7 73 










Explanation of Terms 


Net ten days, or n/10, means that the purchaser must pay the invoice as rendered within 
ten days. If not paid when due, interest may be charged, since the purchaser expressly or im¬ 
pliedly agrees to the terms. 

One per cent ten days, or 1/10, means that the purchaser may deduct 1% from the invoice 
as rendered if he pays it within ten days. If he neglects to pay it within the term of discount, 
he must pay the full amount. The possible deduction of 1% is an incentive to prompt pay¬ 
ment. 

Two per cent 30 days, or 2/30, means that the purchaser may deduct 2% from the face of 
the invoice any time within 30 days. Thereafter it is net. 

On account, or on a/c means that the term within which the invoice may be paid is indefinite. 
Because it is indefinite it is used infrequently. 

Cash 2% means that the purchaser may deduct 2% from the face of the invoice if it is paid 
immediately. It is a special inducement to quick payment. 

Note ten days indicates that upon receipt of the invoice the buyer shall issue his note at 
ten days (or whatever term is specified) for the amount. The note should bear the date of the 
invoice. 

Sight draft indicates that the seller retains the right to draw a draft on the buyer for im¬ 
mediate payment. This is equivalent to Cash terms. 

Goods are^also sent C. O. D. (collect on delivery) by express or parcel post. When goods 
are so shipped, the buyer must pay for them before he receives them. This method is used 
when dealing with strangers, or with persons to whom the seller does not wish to extend 
credit. 




























APRIL 


61 


When goods are shipped C. 0. D. the amount may be charged to a C. 0. D. account. If 
this method is used, the C. O. D. account is credited with returns. The names of the indi¬ 
viduals to which such shipments are made appear in the explanation column of the ledger. 

Goods are also shipped C. 0. D. by freight. This form of shipment is indicated by Bill of 
Lading with Sight Draft attached (B/L, S/D). When goods are shipped in this way, the bill 
of lading (which is a copy of the contract between the shipper and the carrier) is sent to an 
agent, usually a bank. Attached to the bill of lading is a sight draft, calling upon the buyer to 
pay for the goods upon presentation. When the goods arrive at destination, the common car¬ 
rier informs both the bank and the buyer. The latter, upon paying the draft, may secure the 
bill of lading and with it the title to the goods. The bank then remits the payment to its cus¬ 
tomer, usually making a small charge for its services. 

The student will observe the advantages of the sales journal. It furnishes a complete and 
compact record of all sales of merchandise. Much time is saved both in making the entry and 
in disposing of it later. Since all the credits in the sales journal are Sales, it is not necessary to 
post the separate amounts to Sales. Each individual account is debited for the amount of the 
invoice and the total is credited to the Sales account in the ledger. 

Exercise 9 

Rule a sales journal, following the preceding model. Turn to the journal entries for March 
and record all the sales for that month. Rule the sales journal, and bring down the total to the 
credit of Sales at the end of the month. 

THE PURCHASES JOURNAL 

The purchases journal, similar in form to the sales journal, contains a record of all mer¬ 
chandise purchased. Details as to items and prices are omitted because the invoice itself is 
filed and may be referred to when necessary. 

There are, of course, other forms of invoice records. Invoices may be pasted in a book, or 
filed in a loose-leaf binder. The form of the record does not affect the principle involved, and 
that style should be used which is best adapted to the requirements of the business. 

As in the sales journal, much time is saved in making the entry and in posting to the 
ledger. Since every debit is Purchases, it is not necessary to post the separate amounts to that 
account. Each individual account named is credited for the amount of the invoice, and the 
total is posted to the debit of Purchases account in the ledger. When the terms of the invoice 
offer a choice as to time of payment, as 2/10, n/30, the earlier date should be recorded in the 
“When Due” column. The following model illustrates a simple form of the purchases journal. 


PURCHASES JOURNAL 


rT 


■ '■ ■■ -rz 

E L.P. 

ACCOUNT CREDITED 

ADDRESS 

TERMS 

WHEN 

DUE 

WHEN 

PAID 

PUR. DR. 

| 3 


3s -dz, 2^. ^ 


¥ 

3 


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62 


ELEMENTARY COURSE 


The cash book, sales journal, and purchases journal are books of original entry complete in 
themselves, recording equal debits and credits for each transaction. There may be as many 
special books as the scope and nature of the business may require. In proportion as the num¬ 
ber of special books increases, the number of entries in the general journal will decrease. 

Exercise 10 

Rule a purchases journal according to the preceding model. Turn to the journal entries 
for March and record all the purchases for the month. Rule the purchases journal and bring 
the total down to the debit of Purchases. 

CHECK BOOK AND PASS BOOK 

Banks. — A commercial bank is an institution which receives money for deposit and safe¬ 
keeping, provides for the payment of money on the order of its depositors by means of checks, 
discounts commercial paper held by its customers, makes loans to borrowers, and issues its own 
notes which circulate as money. 

There are five distinct types of banks: Commercial banks, savings banks, trust companies, 
building and loan associations, and safe deposit companies. 

As applied to the work of this book, the student will be chiefly interested in the first type, 
and in two of its functions: 1, the receiving of deposits and the checking privilege, which grows 
out of the deposit function; and 2, the discounting function. 

The commercial bank may be organized either under the laws of a state, or under the fed¬ 
eral laws. There is no fundamental difference between state banks and national banks except 
as regards their supervision. 

Deposits. — Assume that the student wishes to open an account at a commercial bank. 
If he is not acquainted at the bank, he will need some one to introduce him and, thus, in a 
sense to vouch for his desirability as a customer. 

The applicant, having satisfied the proper official as to his desirability as a customer, will 
be required to fill out one or more signature cards. This card must show the depositor’s signa¬ 
ture as he will write it day after day for the rest of his life, certainly during his association with 
the bank. The bank must know the signatures of its depositors, and it would be impossible to 
do this if the form of the signature were changed from time to time. 

Form of Signature Card 
















APRIL 


63 


DEPOSITED IN THE 


Commercial Bank 


Deposit Slip. The applicant then makes out a statement called a deposit slip, which 
shows the nature and amount of his deposit. Deposit slips vary somewhat in form, but they 
conform generally to the illustration shown below. If checks are to be deposited, the manner 
of listing them depends upon whether 

they are “ local ” or out-of-town Deposit Slip 

checks. If they are local, that is, 
if they are drawn on a bank in the 
same city, they should be listed in¬ 
dividually under the name of the 
bank upon which they are drawn, 
because the bank in which they are 
deposited collects them from the 
banks on which they are drawn, 
either by messenger or through the 
clearing house. If the checks are 
drawn on out-of-town banks, they 
should be listed individually under 
the name of the city, because the 
bank in which they are deposited 
will collect all checks on a given city 
through one correspondent bank. 

To put it another way, if the checks 
are local, give the name of the bank 
upon which they are drawn; if the 
checks are out of town, give the 
name of the city or town in which 
the bank is located. 

Banks are also identified by a 
compound number, as 2-27. This 
number is called the “transit num¬ 
ber,” and is assigned to the banl^ 
by the American Bankers’ Associa¬ 
tion. The first number refers to 
the city in which the bank is located; 
the second number is the number 
of the bank in that city. 

^ Bank Book. — The applicant 
will receive a small blank book, 
called a bank book, or pass book, 
in which the amount of his deposit 
will be entered. The entry should 
always be made by the proper 

official or clerk, and when so made becomes the depositor’s receipt. 

The applicant has now become a full-fledged depositor, with money to his credit and 
the privilege of drawing checks against the same. For this purpose the bank will give him a 
check book. For its stock checks the bank makes no charge to its depositors, but if the 
depositor desires some special form, he will usually have to pay for the special printing or 
engraving. 

































64 


ELEMENTARY COURSE 


Checks. — A check is an instrument drawn on a bank by a depositor, demanding the pay¬ 
ment of money. The person who orders is the drawer, the bank on whom it is drawn is the 
drawee, and the person named to receive payment is the payee. 

Checks, like notes, are negotiable instruments, and like notes may be negotiated by in¬ 
dorsement and delivery, or by delivery only, depending upon how they are written and indorsed. 
If no existing person is named as payee, then the check is payable to bearer. A check written 
to the order of “Cash,” or “bearer,” or “John Doe” (a fictitious name) is payable to bearer. 
If the only indorsement, or the last indorsement, is in blank, the check is payable to bearer. 
Nevertheless, the transferer’s indorsement is generally required, whether or not it is legally 
necessary, as an evidence of good faith and as a means of tracing the course of the check. 

Checks circulate with much greater freedom than notes. They have almost displaced 
money in the transaction of modern business. It is estimated that at least 90% of all business 
transacted in the United States is transacted by means of checks, rather than actual money. 

The Check Stub. — The stub is that part of the check on which the drawer makes his origi¬ 
nal record with regard to the payee, the account to be charged, the amount, etc. The stub is 
an important part of the record, and should be filled out first and with the same care which is 
used in filling out the check. The stub record may be on a separate sheet, but usually the 
check and the stub are bound together with perforations between them to make detaching 
easy. A check calls for the payment of money upon presentation. The drawer has no 
way of knowing into whose hands it may come after it leaves his. For his own protection, 
then, in cooperation with his bank, he must use great care in filling out the checks; first, so 
that the amount cannot be readily changed, and, second, so that the check will not be ambigu¬ 
ous. If the words and figures naming the amount to be paid do not agree, the words hold in 
preference to the figures, but the bank may refuse to pay until the ambiguity is corrected. The 
only way to correct an error on a check is to write a new one. Never erase. Never cross out 
one word or figure and write another in its place. 

Responsibility. — If the bank pays a forged check, it is liable to the depositor for the 
amount paid, because the bank must know the depositor’s signature. If the bank pays a check 
which has been raised to a larger sum, the responsibility for the ensuing loss falls upon the de¬ 
positor if his carelessness was the cause of the loss; otherwise, upon the bank. 

Canceled Checks. — No matter where a check is sent, it must come to the bank upon 
which it is drawn in order to be cashed. Even then, it is not usually cashed, but deposited 
with other items for credit. In any event, whether it is cashed, or credited to another account, 
it is charged to the account of the drawer. When it is so charged, it is canceled, usually, by 
means of a canceling stamp which cuts the word “Paid” in the check itself. The check goes to 
the bank bookkeeper, who charges it to the depositor’s account. The check now goes to the 
filing department, where it is filed with other of the depositor’s checks. Once a month the 
bank makes up a statement of the depositor’s account. This statement shows the balance on 
deposit at the beginning of the month, the deposits made and checks drawn during the month, 
and the balance at the end of the month. The statement, together with the canceled checks, 
is either returned to the depositor by mail, or handed to him at the bank. Some banks, instead 
of making out monthly statements, strike a balance in the depositor’s pass book either at stated 
periods, or at the depositor’s request. Whatever variation there may be in the practice the 
purpose is the same — to furnish the depositor a statement of his account with the bank and to 
return his canceled checks. The check still serves a very useful purpose. The payee could not 
realize on it without indorsing it, so that the canceled check now serves as a convenient and 
valuable form of receipt, and should therefore be kept on file. 


APRIL 


65 


Statement of Your Account with The Commercial Bank 
January 31, 19— JAMES M. HASTINGS 



Vouchers Enclosed 



Date 

Checks 

Date 

Deposits 



Balance Forward 


Jan. 1 

$175.60 


$1365.80 

4 

269.80 



8 

173.67 

8 

725.60 

12 

16.50 



15 

23.85 



22 

234.50 

22 

963.17 

25 

37.95 



26 

102. 



28 

97.60 

29 

138.90 



Balance 

2062. 


KEY 




LST — Item as per list INT — Interest PLEASE EXAMINE AT ONCE 

COL — Collection OD —■ Overdraft If no errors are reported in ten days 

RET — Return OO — Closed account account will be considered correct 


Reconciliation. —• Upon receiving the bank statement, the depositor should examine it care¬ 
fully and compare it with his own balance as shown by the check book. If the balances differ 
— and they nearly always will — the depositor by comparing check stubs for checks issued 
with canceled checks for checks paid, can account for the difference. This is called the recon - 
dilation of the bank statement with the check book. As soon as the depositor writes a check, 
he subtracts the amount from his balance. The bank cannot make the deduction until some 
time later when the check is presented. Consequently, the bank statement usually shows a 
larger balance than the depositor’s account. Comparing checks with stubs, the depositor as¬ 
certains what checks had not been cashed when the statement was made up. If, now, he adds 
the sum of these unpaid checks to his own balance, the amount should equal the balance shown 
by the statement. If it does not, he must locate the error, either in his own record or in that of 
the bank, usually in his own. The opposite side of the statement contains a form (illustrated 
below) upon which the depositor may list the unpaid checks and reconcile the two statements. 
The statement and the canceled checks may then be filed. 

Depositor’s Proof. —• To prove the balance as shown on your statement. Sort the checks 
numerically or by date issued. Check off on the stubs of your check book each of the checks 
paid by the bank and make a list of the numbers and amounts of those still outstanding in the 
space provided, to the sum of the outstanding checks add the balance as shown by your check 
book. This amount should correspond with the bank’s balance, as shown on this statement. 

CHECKS OUTSTANDING 


Number Amount 

76 $32.50 

78 2.15 

81 240.80 


Total Outstanding Checks $275.45 

Balance as per check book 1786.55 


Total 


$2062.00 




66 


ELEMENTARY COURSE 


JAMES M. HASTINGS’ BUSINESS — APRIL 

The student is now to act as bookkeeper for James M. Hastings, who has opened a store 
at 146 Elm Street, for dealing in flour, grain, and produce at wholesale. The salary paid will 
be $75 per month. 

Mr. Hastings attends to the buying and selling and is absent from the city most of the 
time; a power of attorney will be conferred upon the student in order that he may sign and 
indorse notes, checks, and other papers during Mr. Hastings’ absence. The power of attorney 
is the first paper on the pad of incoming vouchers which belongs to the outfit of business 
papers and forms furnished the student. The document should be read carefully in order that 
the form and wording be understood, and then folded lengthwise. Across the end of the folded 
instrument write: 

Power of Attorney 
given to 

(Student’s name) 
by 

James M. Hastings 
April 1 , 19 — 

The document may then be filed in the folder labeled Vouchers, which will be found in the . 
large envelope of Business Forms. 

Books Used. — In this exercise, the books used will be a journal, purchases journal, sales 
journal, cash book, and ledger. All cash transactions will be entered in the cash book, as illus¬ 
trated on pages 58 and 59. All transactions other than cash will be recorded in the other books 
of original entry (journal, purchases journal, and sales journal). 

Selling Price Lists. — Each student will be assigned a separate price list from the following 
table, from which the selling prices of all commodities dealt in will be taken. 

Currency. — In addition to receiving checks and making payments by check, the student 
will also handle currency in the form of imitation bills and fractional pieces. This provides 
excellent drill in counting money rapidly and accurately, in arranging bills according to de¬ 
nominations and all facing the same way, and in balancing cash. 

The proper way to count bills will be demonstrated by the teacher, or the student should 
take advantage of the opportunity of watching an experienced cashier or a paying teller at any 
bank. Their methods of handling money should be carefully imitated in all practice work. 

All currency and checks received should be placed in the large envelope labeled Cash 
Drawer, which will be found in the package of Business Forms. All currency and checks issued 
should be placed in the envelope labeled Cash Paid Out. 


April Selling Price Lists 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

Apples. 

3.50 

3.60 

3.70 

3.80 

3.90 

4.00 

3.52 

3.62 

3.72 

3.82 

3.92 

3.54 

3.64 

Barley. 

.86 

.91 

.86 

.91 

.86 

.87 

.92 

.87 

.92 

.87 

.88 

.86 

.88 

Corn . .. 

.86 

.84 

.85 

.86 

.86 

.86 

.85 

.86 

.87 

.85 

.86 

.85 

.87 

Flour. 

9.00 

8.90 

8.80 

8.70 

8.60 

8.50 

8.98 

8.88 

8.78 

8.68 

8.58 

8.96 

8.86 

Oats. 

.56 

.58 

.57 

.56 

.56 

.56 

.57 

.56 

.55 

.57 

.56 

.57 

.55 

Potatoes. 

1.10 

1.15 

1.20 

1.15 

1.10 

1.15 

1.20 

1.15 

1.10 

1.15 

1.20 

1.15 

1.10 




































APRIL 


67 


April Selling Price Lists — Continued 



14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

Apples. 

3.75 

3.80 

3.75 

3.70 

3.75 

3.75 

3.80 

3.80 

3.75 

3.70 

3.65 

3.80 

Barley. 

.91 

.86 

.88 

.92 

.90 

.88 

.90 

.91 

.88 

.86 

.90 

.91 

Corn. 

.85 

.86 

.84 

.86 

.84 

.86 

.84 

.86 

.85 

.84 

.85 

.86 

Flour. 

8.75 

8.70 

8.75 

8.80 

8.75 

8.75 

8.70 

8.70 

8.75 

8.80 

8.85 

8.70 

Oats. 

.57 

.56 

.58 

.56 

.58 

.56 

.58 

.56 

.57 

.58 

.57 

.56 

Potatoes. 

1.15 

1.20 

1.15 

1.10 

1.15 

1.20 

1.10 

1.05 

1.10 

1.15 

1.12 

1.15 


TRANSACTIONS 

No. 1 April 1, 19— James M. Hastings invests $8000 in the business which he has begun 
on this date. The amount should be in agreement with the currency contained in the envelope 
numbered to correspond with the number of this transaction on the April pad of incoming 
vouchers. 

Make an entry on the Receipts side of the cash book. (B. P. 1 and 2.) The form of an 
entry will vary according to the books used, but the principles governing the entry do not 
change. 

Count the cash. If it is correct, place it in the Cash Drawer. 

No. 2 April 1 Mr. Hastings has rented the building at 146 Elm Street, from R. B. 
Hines at a rental of $100 per month. Pay April rent in currency, using bills of the largest de¬ 
nomination possible. 

Make the entry on the payments side of the cash book. (B. P. 3 and 4.) 

Remove from the pad of incoming vouchers the lease and receipt, each numbered 2, repre¬ 
senting the business papers which were issued in connection with this transaction. Read the 
lease carefully, fold it lengthwise, and file it with the receipt in the folder labeled Vouchers. 

No. 3 April 2 Bought goods of Daniels Bros., as per invoice. 

Detach the invoice from the pad of incoming vouchers. See that the multiplications and 
the addition are correct, placing a check mark against each correct amount at the right. If the 
invoice is correctly figured, write O. K. with your initials underneath, in the lower left-hand 
corner. 

Make the entry in the purchases journal. (Do not make an entry in the journal.) 

File the invoice in the invoice file. 

Take from your Cash Drawer the money to pay the invoice, using the .largest possible de¬ 
nominations, and place it in Cash Paid Out envelope. Record the transaction in cash payments. 

No. 4 April 2 Bought goods from D. Davenport & Co., as per invoice. 

Check and O. K. the invoice as in No. 3. Make the entry in the purchases journal. Pay 
the invoice and file it in the invoice file. Take the proper amount of cash from the Cash Drawer 
and place it in the Cash Paid Out envelope. Make the proper cash book entry. 

No. 5 April 3 Voucher No. 5 from the pad of incoming vouchers shows an order from 
J. A. Barker for a bill of goods. The terms are cash, and the cash accompanies the order. 

Make out the invoice on a blank billhead taken from the pad in the package of Business 
Forms. Use the price list assigned you. If the invoice is correctly figured, it will agree with 
the amount of cash accompanying the order. The invoice should be receipted and placed in 
the envelope labeled Vouchers for Others. 


































68 


ELEMENTARY COURSE 


The following represents the form of a bill after it has been treated as explained above. 


Book 

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^rHE^yr 1 ' • ifIffiffikSM Directors -• 

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Sold to 



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File the order and all subsequent orders in the envelope labeled Vouchers. 

Place the cash received in the Cash Drawer. 

Make an entry in the sales journal, debiting J. A. Barker and crediting Sales; and an 
entry in the cash book, debiting cash and crediting J. A. Barker. 

No. 6 April 3 Bought goods from L. A. Wright & Co., as per invoice. Proceed as in 
transaction No. 3. • 

Do not neglect to place the proper amount of cash in Cash Paid Out. 

No. 7 April 4 Bought books and stationery for office use, as per invoice. Pay the in¬ 
voice in currency, file in Vouchers folder, and make proper cash book entry. (B. P. 3.) 

Make no entry in the purchases journal for this transaction. It is not a purchase of mer¬ 
chandise. 

No. 8 April 4 Sell E. M. Smythe & Co., for cash, merchandise as per order received. 
Proceed as in transaction No. 5. Make out the invoice and receipt it. Place the order in the 
Vouchers file. Place the invoice in Vouchers for Others. Place the cash received in Cash 
Drawer. Make entries in sales journal and cash receipts. 

No. 9 April 4 Bought merchandise from Hatheway & Reynolds, as per invoice. Note 
the terms. Enter in the purchases journal only. 




















































APRIL 


69 


No. 10 First Report Fill out the report blank taken from the pad of incoming vouch¬ 
ers. Foot in pencil the debit and credit sides of the cash book and enter the footings on the 
blank lines for Cash Receipts and Cash Payments, the cash on hand being the difference be¬ 
tween the two amounts. Count the cash in the Cash Drawer. If it is equal to the balance 
shown by the cash book, you have proved cash. If the amount called for by the record (the 
cash book) and the amount actually on hand differ, an error has been made which must be dis¬ 
covered and corrected before the report is handed in. If you have a discrepancy, check your 
cash book entries with your handling of cash. Make sure that each entry on the receipts side 
is for cash actually received; that each entry on the payments side is for cash actually paid 
out. Verify the amount in Cash Paid Out. It should be equal to the total amount entered on 
the payments side. If Cash proves, finish the report. Foot in pencil the purchases journal and 
the sales journal, and from these books obtain the amounts needed to fill out the report. The 
completed report, together with such books and papers as may be called for, should be sub¬ 
mitted to the instructor. 

No. 11 April 5 Open an account for Mr. Hastings in the Commercial Bank, depositing 
$5000 in currency. 

Make out a deposit slip for $5000 according to the illustration on page 63. Write your 
own name and price-list number on the deposit ticket, near the bottom, for the convenience of 
the teacher. 

Count out $5000 in cash from the Cash Drawer and take the money, deposit slip and pass 
book to the bank. Receive credit for the amount of the deposit. (If there is no banking de¬ 
partment in the school, the teacher will make the proper entry in the student’s bank book.) 

Make a record of the deposit on the stub of your check book according to the following 
form, filling in the current year. 

Form of Stub and Check 



No other entry is required for this transaction. 

No. 12 April 5 Sell Charles E. Hayes goods on account, as per his order of the 4th 
inst. Make out the invoice. Enter in sales journal only. 

No. 13 April 6 Fill Ellis & Rand’s order. Proceed as in transaction No. 12. 

No. 14 April 8 Bought goods from Smith & Dorothy as per invoice of this date. 

No. 15 April 8 Received $300 in currency from Charles E. Hayes to apply on account 
of your invoice of the 5th. Record this transaction in cash receipts. (B. P. 4 and 10.) 

Write a receipt for the amount, using voucher No. 2 as a model. Place the cash in the 
Cash Drawer and the receipt in Vouchers for Others. 

No. 16 April 9 Pay Hatheway & Reynolds $400 in currency to apply on account of 
their invoice of the 4th. A receipt is received covering the amount, which should be filed in 
the Vouchers file. Enter on the payments side of the cash book. 


























70 


ELEMENTARY COURSE 


No. 17 April 10 Bought goods from George C. Cary, as per invoice. Terms: On account. 

No. 18 April 10 Received a promissory note from Ellis & Rand to apply on your in¬ 
voice of the 6th. File the note in the Safe envelope. 

This entry must be made in the general journal, since no special book is provided for notes. 
All details of the note should be mentioned in the explanation, or narrative, of the transaction. 
(B. P. 13 and 10.) 

No. 19 April 11 Fill Charles E. Hayes’ order of the 10th. 

No. 20 April 12 Bought goods from L. A. Wright & Co., as per invoice. 

No. 21 April 14 Gave L. A. Wright & Co. a promissory note at 10 days for $400 with¬ 

out interest, to apply on account. Write the note, using one of the blanks found in the package 
of Business Forms. (See voucher No. 18.) Place the note in the Notes Payable envelope. 
Make the entry in the journal. (B. P. 7 and 14.) 

No. 22 April 14 Fill Ellis & Rand’s order of the 13th. 

No. 23 April 16 Received check from Charles E. Hayes to apply on account. Enter on 
the receipts side of the cash book. Place the check in the Cash Drawer. 

No. 24 Second Report — Prepare the report, being careful to include every detail asked 
for.- See that the difference between the two sides of the cash book is equal to the amount of 
cash in the Cash drawer plus the bank balance as shown by the check book. The last two items 
— Notes Issued and Notes Received — may be found from the journal entries. Submit the 
report, together with such books and papers as may be called for, to the instructor. 

No. 25 April 17 Gave George C. Cary a check for $700 to apply on account of his in¬ 
voice received April 10. 

Fill out the stub and subtract the amount of the check from the bank balance (in this case 
the amount of the first deposit), as shown in the illustration. 

Fill out the check (see illustration). 



Detach the check from the stub and place it in Cash Paid Out. 

Make the cash book entry from the stub of the check book. When the entry has been 
made on the payments side of the cash book, draw a line across the stub to show that the cash 
book record has been made. 

No. 26 April 19 Fill order of T. W. Bowen & Co., dated the 18th. 

No. 27 April 20 Received check from T. W. Bowen & Co. to apply on their invoice of 
the 19th. This transaction is similar to No. 23. 
















APRIL 


71 


No. 28 April 20 Received check from Ellis & Rand in payment of their note due to-day. 

Before making an entry for cash received, always consider the purpose for which it is re¬ 
ceived. Do not credit Ellis & Rand. This is not a payment on account. (B. P. 15.) 

Make the entry, file the check, and remove the note from the Safe envelope. Receipt the 
note by writing across the face: 

Received Payment , 

April 20, 19— 

James M. Hastings 
per (Student’s name). 

Place the note in Vouchers for Others. 

No. 29 April 20 Gave George C. Cary a promissory note at 30 days without interest for 
the balance due him. Since the accounts are not posted at this time, it will be necessary to 
examine the purchases journal to ascertain the amount of your purchases from Cary, and in the 
cash book and journal to ascertain how much you have paid him on account of such purchases. 

The transaction is similar to No. 21. Write the note and make the proper journal entry. 

No. 30 April 23 Bought goods from Garfield Bros., as per invoice. 

Check all invoice extensions. Make the entry in the purchases journal, and file the invoice. 

No. 31 April 23 Give Garfield Bros, check for $750 to apply on account of invoice of 
this date. 

This is check No. 2. Fill out the stub, subtract the amount of the check from the previous 
balance. (See illustration.) Write the check and make 
the cash book entry. Place all checks you write in the 
Cash Paid Out envelope. 

No. 32 April 24 Give L. A. Wright & Co. check 
in payment of our note dated April 14, which is due to-day. 

Fill out the check stub. Be careful to write “Notes 
Payable” in the space telling what the check is for. Do 
not debit L. A. Wright & Co. You are not paying them 
on account, but you are paying your note. Write the 
check and make the cash book entry. (B. P. 16.) 

Remove the note from the Notes Payable file, write 
“Paid, April 24, 19—” across the face, and place it in 
the Vouchers folder. 

No. 33 April 25 Bought merchandise from Bernet 
& Craft as per invoice. 

No. 34 April 26 Fill H. A. Woodbury’s order of 
the 25th. 

Make out the invoice, verify your calculations, enter 
in sales journal. 

No. 35 April 27 Draw a check for $75 in favor of 
James Hastings. This money is for Mr. Hastings’ per¬ 
sonal use. 

Observe previous instructions with regard to making 
out the check. Make the cash book entry and place the 
check in Cash Paid Out. (B. P. 12.) 


Check Stub Filled Out 
























72 


ELEMENTARY COURSE 


No. 36 April 28 Fill order of T. W. Bowen & Co. 

No. 37 April 30 Pay bill of City Carting Company by check. Note that the bill is for 
cartage on merchandise bought. 

Write the check, make the cash book entry, and file the receipted bill. (B. P. 11.) 

No. 38 April 30 Received a promissory note from T. W. Bowen & Co. for 15 days 
without interest to apply on account. 

Make the journal entry, and file the note in the Cash Drawer envelope. (B. P. 13 and 10.) 

No. 39 April 30 Fill H. A. Woodbury’s order of the 29th. 

No. 40 April 30 Pay your month’s salary as bookkeeper, $75, in currency, taking the 
amount from the Cash Drawer. (B. P. 3.) 

No. 41 April 30 Remove all currency and checks, from the Cash Drawer and make up 
deposit. Indorse the checks (see illustration above). Prepare the deposit slip. Under Specie 


Form of Check, Indorsed 



list the amount of your fractional currency (one-cent to fifty-cent pieces inclusive); and on 
the following lines the amount of each check separately. If the check is drawn on a bank in 
your city, list the name of the bank; but if the check is drawn on a bank in another city, list 
the name of the city. 














































APRIL 


73 


Present the deposit slip with the currency and checks at the bank, or to the instructor, 
and receive proper credit in the bank book. Make a memorandum of your deposit on the re¬ 
verse side of the check stub and write the total deposit in the money column. Add the amount 
of the deposit to the previous bank balance. (See illustrations.) 

No. 42 Third Report — Prepare the report called for, making sure that your cash proves. 
Since all cash has been deposited, the difference between the two sides of the cash book must 
equal the balance in bank, as shown by the check book. Hand the report, together with books 
and papers, called for, to the instructor. 

No. 43 Balance the cash book, foot and rule the purchases journal and sales journal. Give 
careful attention to every detail of the work. (See illustrations on pages 58, 59, 60, 61.) 

No. 44 Open ledger accounts. Beginning on the first blank page in Blank No. 4, open 
accounts in the following order, leaving space as indicated. 


Cash | page 

Notes Receivable § “ 

Accounts Receivable, arranged alpha¬ 
betically, each J “ 

Notes Payable J “ 

Accounts Payable, arranged alphabet¬ 
ically, each J “ 


James M. Hastings, Capital \ page 

James M. Hastings, Personal \ “ 

Sales i “ 

Purchases J 11 

Inventory § u 

Freight and Cartage \ “ 

General Expenses J “ 

Profit and Loss \ “ 


Take the Accounts Receivable names from the sales journal, and the Accounts Payable 
names from the purchases journal. The addresses for the personal accounts will be obtained 
from the same sources. 

No. 45 Post from the sales journal. Debit the personal accounts for all items; credit 
Sales for the total. Page all posting, writing S with the page number to indicate that the post¬ 
ing is from the sales journal. 

No. 46 Post from the purchases journal. Credit the personal accounts for all items; 
debit Purchases for the total. Write P with the page number in the ledger folio column. 

No. 47 Post from Cash Receipts. All items entered in the Account Credited column are 
posted to the credit of the respective accounts; the total is posted to the debit of Cash. Write 
C with the page number in the ledger folio column. 

No. 48 Post from Cash Disbursements. All items entered in the Account Debited column 
are posted to the debit of the respective accounts; the total is posted to the credit of Cash. 
Write C with the page number in the ledger folio column. 

No. 49 Post all items from the journal to the respective accounts. Write J with the page 
number in the ledger folio column. 

No. 50 Check post all work before beginning a trial balance. 

No. 51 Take a trial balance and submit it for inspection. When the trial balance is ap¬ 
proved, copy it in the space indicated on the cover of Blank No. 2. 

No. 52 Prepare a Profit and Loss statement. An inventory of merchandise on hand April 
30 shows the following: 

305 bbl. Apples 675 bu. Corn 

200 bbl. Flour 800 bu. Oats 

25 bu. Barley 1025 bu. Potatoes 

Calculate the value of the inventory, using the latest cost price of each commodity as shown by 
the invoices. Do not use the selling prices. 


74 


ELEMENTARY COURSE 


Review Business and Financial statements, pages 37-39. Follow the form of Profit and 
Loss statement shown on page 39. 

No. 53 Prepare a Balance Sheet, following the form shown on page 41. 

If the statements agree; that is, if the investment (after the Student’s personal account 
has been deducted) plus the net profit is equal to the assets minus the liabilities, submit them 
for approval, and when approved, copy in Blank No. 3, following the trial balance. 

If the statements do not agree, check them with the trial balance. Every debit balance 
(except Student’s personal account) must be used once either as a loss or as an asset, and every 
credit balance (except Student’s capital) must be used once either as a profit or as a liability. 

If any correction is made, or if any account is introduced in the statements that has not 
previously appeared in the journal, ledger or in the trial balance, the principle of debit and 
credit must be observed. 

Therefore, the inventory of merchandise, which now appears for the first time as a factor in 
Mr. Hastings’ records, must be used on both statements. It is debited on the balance sheet 
because it is an asset to the business. It is credited on the profit and loss statement because, 
from the bookkeeping standpoint, it increases the gross profit on sales. 

By studying the Profit and Loss Statement on page 39, it is seen that the inventory of mer¬ 
chandise is credited, in effect, by subtracting it from Purchases, which is a debit entry. 

In closing a set of books, or in making business statements at stated times during the year, 
adjustments, additions or corrections may be effected by first making journal entries, posting to 
the ledger, and then including them in the trial balance and statements, instead of making the 
adjustment or correction first in the statements, and then carrying it by closing entries as shown 
above, into the journal and finally posting to the ledger. The result is the same, the entry is the 
same, whichever method is used, but where there are many adjustments, the method of making 
the entry first in the journal insures greater accuracy, because the principle of debit and credit 
has been followed through the various books and through the trial balance; after which the book¬ 
keeper merely utilizes the trial balance in making the statements, viz., asset and liability accounts 
are transferred to the balance sheet; loss and gain accounts, to the profit and loss statement. 

The proprietary accounts are used in making the final comparison. If they are used in the 
body of the balance sheet, like other personal accounts, the result would be net profit instead 
of net worth. 

No. 54 Make journal entries to close the ledger. 

(а) Debit Inventory, credit Purchases. 

(б) Debit Purchases, credit Freight and Cartage. 

(c) Debit Sales, credit Purchases (with the cost of goods sold). 

(d) Debit Sales, credit Profit and Loss. 

(e) Debit Profit and Loss, credit General Expenses. 

(/) Debit Profit and Loss, credit Student’s personal account (with the net profit). 

( g ) Debit Student’s personal account, credit Student’s capital account. 

The amount for the last entry will be the net profit, which is credited to the personal ac¬ 
count in’(/), minus the amount debited to the account at the end of the month, as shown in the 
trial balance. 

Follow the Profit and Loss statement closely when making the closing entries. 

No. 55 Post the closing entries to the ledger. 

No. 56 Foot and rule all accounts closed by the foregoing journal entries. Rule all per¬ 
sonal accounts which balance, including Student’s personal account. Balance the capital ac¬ 
count and the cash account. 

No. 57 Take a proof trial balance, have it approved and copy following the statements. 


APRIL 


75 


STATEMENTS OF CUSTOMERS* ACCOUNTS 


An invoice is an itemized state¬ 
ment of merchandise sold. The 
word bill is often used with the 
same meaning, but it is used pref¬ 
erably to designate a statement of 
services rendered. Unless the terms 
are cash, an invoice does not involve 
a request for immediate payment; a 
bill always does. 

The word statement is also 
used with different meanings. Some¬ 
times it is merely the statement of 
an amount due, like the upper illus¬ 
tration. In this form, it is a request 
for payment. Sometimes it is an 
abstract of the customer’s account 




Statement 

.. ^ 

-2/ /.10 


i 

A 



M. HASTINGS 

146 Elm street 


\ 






/ 

/ / 


/ 


72/447 

J“47 




■ / 


/ 



<r 

"7^57 

. ■?/?/? 





/ t , 


/?/? 


<5^474? 







4^44*7 

^"47 
















































































Tfl 





- 




for any given period, like the lower 
illustration 

It is a common practice to send 
each customer, at the first of the 
month, a statement showing the 
debit balance of his account to date, 
whether this balance is due or not, 
thus calling his attention to his in¬ 
debtedness and enabling him to 
compare the statement with the 
account in his ledger and note any 
difference which may appear be¬ 
tween his books and the statement. 
Customers’ statements are prepared 
entirely from the ledgeraccounts, and 
the posting must be completed before 
the statements can be made out. 




















































































76 


ELEMENTARY COURSE 


No. 58 You may now prepare 
statements of accounts for all cus¬ 
tomers who owe you a balance. 

Turn to Chas. E. Hayes* ac¬ 
count in your ledger, and from it 
prepare a statement like the second 
form shown above, writing your 
place and the current year. Study 
the form carefully in all its details. 

Prepare similar statements for 
all others who owe you a balance. 

Take note that the first column 
in a statement is an item column and 
is not to be used unless there are 
two or more debit or credit items. 

The following illustrates a form 
of statement required when an ac¬ 
count has a debit balance at the 
beginning of the month for which 
the statement is made. 

No. 59 Present your books to 
your teacher for inspection, after 
having carefully examined them 
yourself to see that all rulings are 
correct and that page marks, dates, 
etc. have not been omitted. It is 
less embarrassing to find your own 
errors and correct them than it is 
to have somebody else point them out to you. This practice also increases accuracy. 


REVIEW QUESTIONS 

1 What are the advantages of special books of original entry? 

2 What should the difference between the two sides of the cash book show? 

3 How is cash proved? 

4 How is posting done from cash payments, receipts, sales journal, purchases journal? 

5 In indexing posting, how is the book indicated from which an item is posted? 

6 What do the following abbreviations mean? n/10, 2/10, a/c, C. O. D., B/L, S/D? 

7 What is a commercial bank? How is an account opened at a bank? 

8 Wbat information should be recorded on the deposit slip? 

9 Why is it desirable to keep a copy of the deposit slip? 

10 What is a check? How are checks negotiated? 

11 Why should the stub be filled out first, and what information should be recorded on it? 

12 Of what use are canceled checks, and how should they be filed? 

13 WTat is the purpose of the bank’s statement to its depositors? 

14 How is the bank statement reconciled with the depositor’s account? 

15 How should incoming invoices be treated? 


Statement 

H^J^M.HASTINGS 

146 elm street’ 


/ 


£*7 

30 



1 

/ o 

j>s 

/ 

/ zs 





/0 


3/A1 

30 

/ / /3 



/ 







A3 




too 







3 / 3 









• 





































































































MAY 


77 


ACCOUNTS INTRODUCED IN MAY 

Interest and Discount. — Interest is money paid for the use of money. In whatever form 
it is found, it is money paid for the use of money. The distinction between interest and dis¬ 
count is not always easy to make. The distinction is pointed out in the following illustrations: 

A borrows money on his own interest bearing note, to run 60 days. At the end of 60 days 
he pays the note and also pays for the use of the money. That is interest paid after the use 
has been received. 

A borrows money from the bank on his non-interest bearing note, to run for 60 days. The 
bank deducts payment in advance for the use of the money and gives A the proceeds. That is 
interest paid in advance, and represents a very common practice. 

A holds B’s interest bearing note to run 60 days. At the end of that time B pays the face 
of the note and also pays for the use of the money. That is interest paid after the use has been 
received. 

A holds B's 60-day note. At the end of 30 days B offers to pay it if A will make an allow¬ 
ance for the use of the money which he will receive 30 days before it is due. A accepts the 
offer, and B pays the note less the allowance. That is discount. 

A’s own 60-day note is held by B. A makes the same offer, which is accepted. That is 
discount. 

From which it will be seen that the distinction may be stated thus: If money is paid for 
the use of money at the end of a loan period, or if it is paid at the beginning of the period, in 
order to get the loan, it is classified as interest. If money is paid for the use of money before 
the end of the loan period, in order to retire the loan, it is classified as discount. 

Whether it is interest or discount, the calculation is the same. There is no difference be¬ 
tween the bank discount for a given period and the interest for the same period. 

Commercial notes are practically all for short terms — 30-60-90-120 days. The rate of in¬ 
terest varies with trade conditions, but the average rate is probably 6%, and all transactions in 
this text are to be figured at that rate unless otherwise specified. 

For short periods the easiest and quickest way to compute interest is by the 60-day method. 
If it requires a dollar 360 days (common interest) to earn 6 cents, it must require it 60 days to 
earn one cent, from which: 

Pointing off two decimal places to the left in any sum gives the interest for 60 days at 6%. 
From which it follows that pointing off three places gives the interest for 6 days; pointing off 
one place gives the interest for 600 days, and for 6000 days the interest equals the principal. 

Thus, if the principal is $750, the interest for 6000 days is $750; for 600 days it is $75; for 
60 days it is $7.50, and for 6 days it is $.75. The interest for any part of 60 days is easily 
found. 

When a non-interest bearing note is discounted, find the interest for the time which the 
note has yet to run, never for the time it has run. 

A note for $5000, dated May 1, to run 60 days, is discounted June 10. Find the discount. 
The note matures June 30, hence on June 10 it has 20 days to run. The discount is calculated 
for 20 days. 

If an interest bearing note is discounted, first find the interest for the full time, and add 
this sum to the face of the note; then find the discount on the amount (face plus interest) for 
the unexpired time. 

Suppose the above note is interest bearing. Find the interest for 60 days, $50; add to the 
face, $5050; calculate the discount for 20 days on $5050; $16.83. The difference between the 


78 


ELEMENTARY COURSE 


amount, $5050; and the discount, $16.83, or $5033.17, would be the proceeds, or cash value of 
the note. 

The interest accounts to be used in May are Interest on Notes Receivable and Interest on 
Notes Payable. 

Interest on Notes Receivable is an income. The entries will appear on the credit side, 
except at closing or when it is necessary to make an adjustment. The function of the account 
is to show the profit realized in the form of interest on notes and loans of other persons. The 
balance of the account shows a profit and is closed into the Profit and Loss account. 

Interest on Notes Payable is' an expense which arises from lack of sufficient funds, which 
makes it necessary to borrow money. The entries will appear on the debit side, except at clos¬ 
ing or when it is necessary to make an adjustment. The function of the account is to show the 
cost of interest on obligations owed to others. The balance of the account shows a loss and is 
closed into the Profit and Loss account. 

w Commercial Discounts. — There are two classes of commercial discounts —• the trade dis¬ 
count and the cash discount. 

The trade discount is made from the list or published price of goods. It is often expressed 
in “series,” as $25, less 25-20-10%. This class of discounts is not recorded on the books of 
either the buyer or the seller, because a trade discount is deducted at the time the goods are 
billed. 

Cash discount is an allowance made for payment within a certain time —10-20-30 days, 
as the case may be. This class of discounts, when taken advantage of, is recorded on the books 
of the buyer and of the seller, because it is not known at the time of billing whether the dis¬ 
count will be taken or not. 

Cash discount is not calculated like interest, because, while there is a time element, or 
term of discount, the discount does not vary during the term of discount. If the term of dis¬ 
count is 10 days, and the payment reaches the creditor on the tenth day, the discount is just 
the same as it would have been on the first day; while on the eleventh day there is no discount 
at all. If the terms are 2/10, there is a discount of 2% at any time within the ten days, and no 
discount at all thereafter. 

Cash discounts are recorded in two accounts, Discounts on Sales and Discounts on Pur¬ 
chases. 

Discounts on Sales is an expense resulting from the inducement which the business makes 
to customers to make prompt payments. The entries will appear on the debit side except at 
closing or when it is necessary to make an adjustment. The function of the account is to record 
the allowances made to customers for prompt payment of bills. The balance of the account 
shows a loss and is closed into the Profit and Loss account. 

Discounts on Purchases is an income, resulting from the ability of the business to pay its 
bills promptly. The entries will appear on the credit side, except at closing or when it is neces¬ 
sary to make an adjustment. The function of the account is to record the profit earned by the 
business by prompt payment of its invoices. The balance of the account shows a profit and is 
closed into the Profit and Loss account. 

Selling Expenses. — The General Expenses account is subdivided into as many accounts 
as necessary to show the desired detail. Selling expenses is one of these subdivisions. The 
function of the account is to record that part of the expenses of the business which is directly 
chargeable to the selling operations. Such items as clerks’ wages, advertising, traveling ex¬ 
penses, salesmen’s salaries, and delivery expenses are selling expenses. A separate account, 


MAY 


79 


however, may be kept with the different items. The entries will appear on the debit side, ex¬ 
cept at closing or when making an adjustment. The balance of the account shows a loss, and 
is closed into the Profit and Loss account. 

Insurance Prepaid. — The premiums on fire insurance policies must be paid in advance. 
The use (protection) is received after the payment is made, hence it is prepaid. If a policy 
costs $240 per year in advance, at the beginning of the insurance term, the insurance company 
has received $240 from the business for which it has as yet rendered no service. At the end of 
the first month 1/12 of the $240 has been used up, and the amount remaining prepaid is $220. 
The $20 which has been used should be charged to the proper expense account, and credited to 
Insurance Prepaid. The function of the account, then, is to show the cost of prepaid insurance, 
and since that cost changes from day to day, the record of the Prepaid Insurance account is 
true only at the time of adjustment. The entries will appear on the debit side, except when an 
adjustment is made. The balance of the account shows an asset. 

Real Estate. — Real Estate is a property account, the function of which is to show the 
cost of real estate owned by the business. In this account should be recorded the cost of land 
and buildings, and all expenses incurred in acquiring title, etc. Improvements and additions 
which increase the original value of the property are also recorded in this account. If any of the 
property is disposed of or destroyed, the entry for the cost of such property will appear on the 
credit side, so that the balance of the account shows the cost of property on hand, and is an 
asset. 

Real Estate Expenses. — The cost of maintaining real estate is recorded in an account 
separate from Real Estate, otherwise the Real Estate account would not show the cost of the 
property on hand. Taxes, insurance, water, rent, repairs, etc., come under the head of Real 
Estate expenses. The function of the account is to show cost of maintenance of real estate. 
The entries will appear on the debit side except at closing or when it is necessary to make an 
adjustment. The balance of the account shows a loss, and is closed into the Profit and Loss 
account. 

Furniture and Fixtures. — Furniture and Fixtures is a property account. The account is 
kept under different names, including Furnishings, Furniture and Equipment, Office Equip¬ 
ment, and Office Furniture. In it is recorded the cost of desks, machines, and office fixtures 
used in conducting the business. The cost entries will appear on the debit side of the account. 
If any furniture is disposed of or destroyed an entry for the cost of such furniture will appear 
on the credit side. The balance of the account shows the cost of furniture and fixtures on 
hand, and is an asset. 

Note. — When no reserve for depreciation account is kept, Furniture and Fixtures is cred¬ 
ited with the depreciation, in which case the balance of the account shows the value of the fix¬ 
tures on hand, and is an asset. 

Accruals and Prepayments. — At the time of closing, interest on borrowed money is fre¬ 
quently prepaid. Such prepaid interest is an asset and should be recorded in an asset account. 
The account used for this purpose is Interest Prepaid on Notes Payable. The balance of the 
account at closing is an asset, but since it is a continually diminishing asset (the prepaid inter¬ 
est being used up with the passage of time), it eventually finds its way into the losses. After 
closing it may be transferred to the Interest on Notes Payable account, or it may be adjusted 
from month to month. 




80 


ELEMENTARY COURSE 


RECEIPTS 



Interest on Notes Payable accrued is opposite in its nature from Interest on Notes Payable 
Prepaid. If a 60-day interest bearing note was given 20 days before the books were closed, 
there would be an accumulation of interest for 20 days. It is not due, and hence not paid, but 
it is a debt owed by the business, none the less. The balance of the account at closing shows a 
liability. It is a constantly increasing liability until it becomes due. After closing it may be 
transferred to the Interest on Notes Payable account, or it may be adjusted from month to month. 

There are many other accounts of this nature, and the student will find a me e extended 
treatment of them in the Advanced Section. 









































MAY 


81 


PAYMENTS 



The bookkeeper has to record many transactions having to do with discounts on purchases 
and sales. This class of transactions may be illustrated by the following proposition. Assume 
that on April 30 Wm. Archer & Co. purchased an invoice of merchandise from the Student, 
amounting to $750, terms, 2/10. The sale must be entered in the sales journal for the full 
amount, since it is not known whether Wm. Archer & Co. will take advantage of the discount 
offered. Four days later a check is received from Archer & Co. for the amount, less 2%, $735. 
The entry, in whatever form it is made, must amount to this: Cash debited for the amount 
received, $735; Sales Discounts debited for the deduction, $15; and Wm. Archer & Co. cred- 

































































82 


ELEMENTARY COURSE 


ited for the amount of the invoice, $750. If the transaction were recorded in the journal, it 
would appear as follows: 

Cash 735. 

Discounts on Sales 15. 

Wm. Archer & Co. 750. 

If, however, the entry has to be made in a cash book of the form already used, certain dif¬ 
ficulties arise. Cash must be debited only for $735, but Archer & Co. must be credited for 
$750. This can be accomplished by making two entries, as follows: 

First, in Cash Receipts: 

19- 

May 4 Wm. Archer & Co Invoice of April 30 750. 

Second, in Cash Payments: 

19— 

May 4 Discounts on Sales Invoice of Wm. Archer & Co., 2% 15. 

The latter entry is a contra entry, made to adjust or correct the entry in cash receipts. 
This method is open to the objection that the entries, taken separately, are not true, since no 
such amount of cash was actually received, and none at all was paid out. The two entries 
must be read together. This method is sometimes used. 

Or, an entry may be made in Cash Receipts for the sum received: 

19- 

May 4 Wm. Archer & Co. Invoice of April 30 $735. 

and an entry made in the journal for the sales discounts, as follows: 

May 4, 19— 

Sales Discounts 15. 

Wm. Archer & Co. 15. 

Allowed Archer & Co. 

2% discount on invoice 
of April 30, paid to-day. 

This entry may be objected to on the ground that it separates the record into two parts. 
It is frequently used, and will be used in the following sets for discounts on notes. 

If the cash book contains a special column for Accounts Receivable and Sales Discounts, 
the entry is simplified. (See third entry in the illustrated cash book.) 

There are three columns on each side of the May cash book. On the cash receipts side, every 
amount credited to a personal account is entered in the Accounts Receivable column, whether 
a discount is allowed or not. Every amount to be charged to Sales Discounts is entered in the 
Sales Discounts column, and the amount of cash actually received is entered in the Net Re¬ 
ceipts column. If the transaction to be recorded involves a discount, care must be used to see 
that the sum of the discount and the net receipt of cash equals the amount credited to the per¬ 
sonal account. An error here will destroy the equality of the debits and credits. 

Posting. — All items in the Accounts Receivable column are posted to the credit of the 
personal accounts named. The total of the Sales Discounts column is posted to the debit of 
that account, and the total receipts for the period is posted to the debit of Cash. Note that 
the balance at the beginning of the period must be deducted from the total at the end of the 
period in order to get the amount of cash received during the month. The balance at the be¬ 
ginning of the period is already shown on the ledger, and if included in the posting at the end 
of the period, the equality of the debits and credits in the ledger will be destroyed. 


MAY 


83 


All items in the Accounts Payable column are posted to the debit of the personal accounts 
named. The total of the Purchases Discounts column is posted to the credit of that account,, 
and the total payments for the period is posted to the credit of Cash. 

A special column may be provided for any account when the items affecting that account 
occur frequently enough to warrant a special column. 

Exercise 11 

On a sheet of three-column journal paper, make cash book headings like the ones shown in 
the illustration, and make cash book entries for the following transactions. 

May 1 Balance of cash on hand, $3372.50. 

2 Gave J. B. Howard check for May rent, $150. 

3 Gave your check for $749.70 to HarVey & Lawson, in payment of invoice of April 30, 
less 2%. Amount of invoice, $765. 

3 Received check from H. J. Pearson & Co., $264.60, in payment of your invoice of May 
1, less 2%. Amount of invoice, $270. 

4 Received check from Johnson & Johnson, on a/c, $500. 

5 Gave your check to A. H. Woodbury, on a/c, $500. 

6 Received check from J. H. Sears & Co., $784, in payment of your invoice of May 1, 
less 2%. Amount of invoice, $800. 

7 Paid clerks’ salaries, $175; office salaries, $125; advertising (charge Selling Expenses), 

$75. 

8 Received check from A. H. Hoover, in payment of your invoice of May 2, less 2%. 
Amount of invoice, $335.80. Calculate the discount. 

9 Gave your check to D. L. Hibner in payment of his invoice of May 3, less 2%. Amount 
of invoice, $1260.80. 

10 Gave your check for $378.10 to J. E. Scott, in payment of invoice of May 3. No dis¬ 
count. 

11 Received from A. E. Smith his check for $808, in payment of his note due to-day. 
Face of note, $800; interest $8. Credit Notes Receivable at face value. Make a separate 
entry for the Interest on Notes Receivable. 

12 Gave your check for $507.50 in payment of interest-bearing note held by E. W. Cole. 
Face of note, $500. Debit Notes Payable at face value. Make a separate entry for Interest on 
Notes Payable. 

13 Gave A. W. Robinson your check for $700, on a/c. 

14 Received from W. L. Barnes his check for $485, in payment of your invoice of May 10, 
less 3%. Amount of invoice, $500. 

15 Paid clerks’ salaries, $175; office salaries, $125; freight bills, $72.50. 

16 Gave your check ffir $857.70 to L. M. Nichols, in payment of his invoice of May 10, 
less 2%. Amount of invoice, $875.20. 

17 Received check from Burrows Bros, in payment of your invoice of May 12, less 2%. 
Amount of invoice, $850. 

21 Gave your check for $748.23 to Brown Bros., in payment of their invoice of May 15, 
less 2%. Amount of invoice, $763.50. 

22 Paid clerks’ salaries, $175; office salaries, $125. 

23 Received check from F. R. Vosburg in payment of your invoice of May 16, less 2%. 
Amount of invoice, $265.30. 

25 Received check from Carlisle & Co. for $563, in payment of their note due to-day. 
Credit Notes Receivable. 


84 


ELEMENTARY COURSE 


HENRY F. ADAMS’ BUSINESS —MAY 

Having been offered a higher salary and a better opportunity for advancement, you have 
accepted a position as bookkeeper for Henry F. Adams, who is about to commence business as 
a wholesale dealer in Tea, Coffee, and Spices, at 246 Main St., your city. Your salary is to 
be $85 per month. Mr. Adams will do all the buying and fix all selling prices of the goods, and 
will spend much of his time on the road. You will attend to the filling of orders, and have full 
charge of the books of the business. Mr. Adams has given you a power of attorney. 

Selling Price List. — The instructor will assign a selling price list from the table given 
below. 

Books Used. — The set of books used will comprise a general journal, sales journal, pur¬ 
chases journal, special column cash book, and ledger. All cash transactions will be entered in 
the Special Column Cash Book, as illustrated on pages 81 and 82. 

Terms of Sale. — The standard terms of sale adopted for this exercise are 2/10, n/30, al¬ 
though some deviation is made from these terms in the cases of certain customers and some 
^commodities. 


Selling Price Lists for May 




1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

Japan . . 






Hf. Ch. 

lb. 

60 

.40 

.38 

.37 

.36 

.25 

.26 

.41 

.35 

.34 

.39 

.24 

.25 

.30 

Oolong. . 






« 

50 

.55 

.60 

.61 

.62 

.73 

.66 

.72 

.70 

.71 

.56 

.63 

.62 

.57 

Ceylon . . 






Case 

50 

.60 

.58 

.55 

.65 

.45 

.50 

.53 

.55 

.45 

.40 

.57 

•56 

59 

Y. Hyson . 






Hf. Ch. 

70 

.35 

.37 

.38 

.39 

.50 

.49 

.34 

.40 

.41 

.36 

.51 

.50 

.45 

Eng. Breakfast . 





u 

60 

.50 

.45 

.44 

.43 

.32 

.39 

.33 

.35 

.34 

.49 

.42 

.43 

.48 

Mocha . . 






Bale 

150 

.25 

,25 2 

.24 

.24 2 

.26 2 

.25 2 

.24 2 

.27 

.28 2 

.29 

.30 

.32 

.28 

J ava . . 






Mat 

75 

.28 2 

.25 

.25 2 

.26 2 

.29 

.30 

.30 2 

.29 2 

.27 2 

.26 

.27 

.24 2 

.24 

Maracaibo 






Bag 

125 

.18 2 

.18 

.19 2 

.19 

.17 

.18 

.19 

.16 2 

.15 

•14 2 

•13 2 

.ll 2 

.15 2 

Rio . . . 






n 

125 

.14 2 

.18 

.17 2 

.16 2 

.14 

.13 

.12 2 

.13 2 

•15 2 

.17 

.16 

.18 2 

.19 

W. Pepper 






Box 

Pail 

10 

25 

.30 

.31 2 

.29 

.28 

.31 

.33 2 

.30 

.33 

.32 

.30 2 

.26 2 

.28 

.29 

Cinnamon 






Box 

Pail 

10 

25 

.35 

.36 

.33 

.34 

.37 

.38 

.33 

.32 

.35 

.39 

.37 

.34 

.34 2 

Cloves . . 






Box 

Pail 

10 

25 

.20 

•18 2 

.21 

.22 

.19 

.16 2 

.20 

.17 

.18 

.19 2 

.23 2 

.22 

.21 

Nutmegs . 








.70 

.69 

.72 

.71 

.68 

.67 

.72 

.73 

.70 

.66 

.68 

.71 

.70 2 

Ginger . . 






Box 

Pail 

10 

25 

.30 

.32 

.35 

.25 

.45 

.40 

.37 

.35 

.45 

.50 

.33 

.34 

.31 


The small index figures used in the above price lists indicate “fourths.” 25 1 equals 25£. 25 2 equals 
25^. 25 s equals 25£. 


Business Practice. — During the month, the student will handle all incoming papers and 
currency, attend to the banking, and issue all outgoing checks, bills, receipts, etc. It is ex¬ 
pected that this work will be given most careful attention and that all business papers will be 
written with care and exactness. 
































MAY 


85 


Selling Price Lists for May — Continued 




14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

Japan. . . . 




. . . 

Hf. Ch. 

Tb. 

60 

.32 

.38 

.40 

.34 

.29 

.31 

.33 

.27 

.28 

.26 

.30 

.29 

Oolong . . . 





a 

50 

.55 

.49 

.52 

.58 

.64 

.67 

.65 

.72 

.57 

.69 

.66 

.58 

Ceylon . . . 





Case 

50 

.61 

.52 

.47 

.43 

.39 

.38 

.41 

.44 

.37 

.36 

.42 

.46 

Y. Hyson . . . 





Hf. Ch. 

70 

.43 

.37 

.35 

.41 

.46 

.44 

.42 

.48 

.47 

.49 

.45 

.46 

Eng. Breakfast 





« 

60 

.50 

.56 

.53 

.47 

.41 

.38 

.40 

.33 

.48 

.36 

.39 

.47 

Mocha . . . 





Bale 

150 

.28 2 

.27 2 

,30 2 

.25 

.31 

.28 

.26 

.27 

.29 2 

.24 

.28 

.26 2 

Java .... 





Mat 

75 

•26 2 

.28 2 

.25 2 

.28 2 

.31 2 

.27 2 

.29 

.24 

.26 2 

.23 

.242 

.292 

Maracaibo . . 





Bag 

125 

.15 

.16 

.13 

.18 2 

.12 2 

.15 2 

.17 2 

.16 2 

.14 

.19 2 

.15 2 

.17 

Rio .... 





u 

125 

.16 2 

.14 2 

172 

.14 2 

.ll 2 

•15 2 

.14 

.19 

.16 2 

.20 

.18 2 

,13 2 

W. Pepper . . 





Box 

Pail 

10 

25 

.27 

.25 

.32 

.31 

.28 

.33 

.28 2 

.27 2 

.28 

.29 

.31 

.27 

Cinnamon . . 





Box 

Pail 

10 

25 

.40 

.38 

.32 

.36 

.41 

.37 

.39 

.42 

.40 

.35 2 

.33 

.34 

Cloves .... 





Box 

Pail 

10 

25 

.23 

.25 

.18 

.19 

.22 

.17 

.212 

.22 2 

.22 

.21 

.19 

.23 

Nutmegs . . . 







.65 

.67 

.73 

.69 

.64 

.68 

.66 

.63 

.65 

.69 2 

.72 

.71 

Ginger . . . 


• 



Box 

Pail 

10 

25 

.29 

.38 

.43 

.47 

.51 

.52 

.49 

.46 

.53 

.54 

.48 

.44 


The small index figures used in the above price lists indicate “ fourths.” 25 1 equals 25£. 25 2 equals 25£. 
25 3 equals 25|. 


TRANSACTIONS 

No. 1 May 1, 19— Henry F. Adams invests $10,000 in the business which he has just 
begun. Make an entry in cash receipts, crediting Henry F. Adams, Capital, and placing the 
amount in the net receipts column. 

In addition to the cash book entry for the investment, an explanatory statement should 
be made in the journal, specifying the owner, the nature of the business, the location, and the 
amount invested. (See illustration, p. 15.) 

Open an account with the Merchants National Bank, depositing check for $9800. The 
check is a part of Mr. Adams’ investment. Enter the deposit on the stub of the check book. 

No. 2 May 1 The National Real Estate Company owns the building at 246 Main Street. 
Your lease is at a monthly rental of $100. Pay the rent for May by check, take a receipt from 
the owners, and make the proper entry in cash payments. Debit General Expenses. 

No. 3 May 2 Bill of the Upton Coal Company for ten tons of coal is received. Pay by 
check and make proper cash book entry. Entry similar to that for No. 2. 

Expense bills and bills for furniture and fixtures, supplies, etc., bought for use in the busi¬ 
ness are not recorded in the purchases journal. This book is only for recording merchandise 
invoices. 





























86 


ELEMENTARY COURSE 


No. 4 May 2 Bought merchandise of West, Stone & Co. as per invoice. Verify the ex¬ 
tensions and enter in the purchases journal. 

No. 5 May 2 Bought merchandise of L. Hennes & Co., terms, 60-day note. Make an 
entry in the purchases journal. File the invoice. Write a note in favor of L. Hennes & Co., 
and make the proper journal entry. (B. P. 7 and 14.) 

No. 6 May 2 Bought merchandise of Shields Bros., as per invoice. Enter in the pur¬ 
chases journal. As the terms are 2% cash, pay the invoice at once by check, deducting the 
discount. Fill out the stub, deduct the amount from the deposit, write the check, and make 
the cash book entry. 

B. P. 32. — Credit Discounts on Purchases with all discounts allowed to the business for 
prompt payment of invoices. 

In this transaction there are two credits and one debit. Shields Bros, are debited for the 
face of the invoice, because the invoice is completely paid. Discounts on purchases is credited 
and cash is credited for the amount of the check. The sum of the two credits equals the debit. 

No. 7 May 3 Fill order of A. W. McKey, and make entry in the sales journal. In mak¬ 
ing out the invoice, follow the form of the West, Stone & Co. invoice in transaction No. 4. 
Note the tabulation of pounds and prices. Regard this as sale No. 1, placing that number in 
the Sales No. column; also place the number in the upper left corner of the invoice. Number 
each succeeding sale in consecutive order. 

No. 8 May 3 Fill F. C. Tenney’s order. Terms: 2/10, n/30. Entry similar to that for 
No. 7. 

No. 9 May 4 Check received from F. C. Tenney in payment of invoice of the 3d, less 
2% discount. F. C. Tenney has taken advantage of the discount offered in the sale of May 
3. It must be understood that while the check is for a smaller sum than the invoice, the 
latter is paid, and F. C. Tenney must be credited not for the amount of the check, but for the 
amount of the invoice for which it pays. 

B. P. 33. — Debit Discounts ON Sales with discounts allowed to customers for prompt pay¬ 
ment of invoices. 

In this transaction there are two debits and one credit. The discount is allowed to a cus¬ 
tomer and is debited. F. C. Tenney is credited for the amount of the invoice. Cash is debited 
for the amount received. The sum of the debits must equal the credit. 

No. 10 May 4 Fill Dickson & Young’s order. 

No. 11 May 4 Bill of Scranton, Wetmore & Co. for blank books, stationery, and office 
supplies. Pay by check. Do not charge Scranton, Wetmore & Co. (B. P. 3.) 

No. 12 May 5 Bill of Hayden Furniture Company for safe and office furniture for use in 
the business. Pay the bill by check and make proper cash book entry. 

B. P. 34. — Debit Furniture AND Fixtures with the cost of furniture and equipment 
purchased for use in conducting the business. 

No. 13 May 5 The National Real Estate Company has offered the building at 246 Main 
Street for sale at $12,000 cash, and as Mr. Adams regards this a fair price, he has negotiated 
for its purchase. The rent paid May 1 is to be allowed to apply on the purchase price. 

In order to make the cash payment, he has applied to the Merchants National Bank for a 
loan of $5000. The bank is willing to discount Mr. Adams’ note for that amount if he can fur¬ 
nish satisfactory personal security. James D. Branson, a business acquaintance of Mr. Adams, 


MAY 


87 


has agreed to indorse Mr. Adams’ note for $5000, and this security is acceptable to the bank. 
The note is drawn for 4 months, and will be similar to the following illustration: 



Form of Discount Memorandum 


The note is made payable to James D. Branson, and before it can be negotiated it must 
have his indorsement. Your teacher will act in place of Mr. Branson and indorse the note. 

The note is written for 4 months, but the bank will count the exact number of days, which 
is 123. Calculate the interest for that time. This is 
interest paid in advance. Make out a discount memo¬ 
randum similar to the form shown in the illustration. 

Leave the note, with discount memorandum at¬ 
tached, at the school bank, if there is one, or place it in 
the Notes Payable file. 

Add the amount of the proceeds to the check book 
balance, stating the source from which the money is re¬ 
ceived. (See illustration.) 


900. 


Deposited. 


d/fjj SO 



Make the entry in cash receipts for the proceeds of the note, as shown in the illustration below. 




S/s to/ 


U-f/y so 


Make an entry in the journal for the interest paid in advance. 

B p as. _ Debit Interest on Notes Payable with all interest paid on notes, whether 
paid in advance or at maturity. 




















































88 


ELEMENTARY COURSE 


The journal entry should be as follows: 


or 





/ 0 2J?> 


/ O .2 ■& 


With these two entries, Cash is debited for the amount received; Notes Payable credited 
with the face of the note; and Interest on Notes Payable debited with the interest paid in ad¬ 
vance to the bank. 

No. 14 May 5 Draw a check in favor of the National Real Estate Company for the pur¬ 
chase price of the property, $12,000, less $100 rent which is to be applied on the purchase price. 
The deed for the property has been received and recorded in the office of the County Clerk, and 
filed by the attorney for Mr. Adams. This necessitates opening an account with Real Estate. 

B. P. 36. — Debit Real Estate with the cost of buildings and lands , and with all expenses 
incurred in obtaining title thereto. 

Make an entry in cash payments debiting Real Estate with the amount of the check. 

The amount charged to General Expenses in No. 2 should now be transferred to Real Es¬ 
tate, since that payment of $100 has been considered as part payment on the property. This 
is a part of the original cost of the property, hence the debit is determined by B. P. 36. Credit 
General Expenses, and state clearly in the explanation space the reason why the transfer is 
made. This entry will cancel the charge to General Expenses. 

No. 15 May 6 Adjustment sheet and bill from the lawyer who made a search of the title, 
passed the papers, made out the deed, and had it recorded. Pay the bill by check and make 
the entry for it. (B. P. 36.) 

No. 16 May 6 Invoice of the Westen Tea & Spice Co. 

No. 17 May 6 Fill order from A. A. Knowles & Co. Note terms as requested in their 
order. Note accompanies the order. Entries in sales journal and journal. 

No. 18 May 8 Fill order from F. C. Tenney. 

No. 19 May 8 Fourth Report — Prove cash, fill out the report called for, and submit 
the report to the instructor for inspection. 

Cash proves if the cash on hand equals the amount of cash shown to be on hand by the 
cash record. 

Cash receipts — cash payments = cash in bank + cash in cash drawer or safe. 

That cash proves is not to be taken as conclusive evidence that your account is correct, 
but only that your actual handling of cash has agreed with your cash record. 

No. 20 May 9 Pay West, Stone & Co.’s invoice of April 30, taking advantage of the dis¬ 
count. Cash book entry similar to that for No. 6. Be sure that the amount in the first column 
minus the amount in the second column equals the amount of the check recorded in the third 
column. 








MAY 


89 


No. 21 May 9 Fill order from Fletcher Bros. Terms: 2/10, n/30. 

No. 22 May 10 Invoice of merchandise received from Shields Bros. 

No. 23 May 10 Received check from Fletcher Bros, in payment of invoice of the 9th, less 
2%. Entry similar to that for No. 9. 

No. 24 May 11 Received $200 currency from Dickson & Young to apply on account of 
invoice of the 4th. Enter the amount in the first and third columns. 

No. 25 May 11 Deposit $200 in currency and the checks on hand. Enter in check book 
and add to last balance. 

No. 26 May 12 Fill A. W. McKey’s order. 

No. 27 May 14 Mr. Adams draws by check $100 for personal use. (B. P. 12.) 

No. 28 May 14 Mr. Adams has placed insurance of $5000 on his building and $3000 on 

his stock of goods in the Equitable Fire Insurance Company, for one year. Write a check for 
the premium of $200, $120 of which is premium on his building and $80 on his stock. 

B. P. 37. — Debit Insurance Prepaid with cost of insurance placed upon real estate , stock 
of goods , or other property. 

The entry is for the premium, not for the policies. 

Observe there are two policies included here; one on real estate and one on stock. The 
cost of insurance on real estate is a real estate expense, while the cost of insurance on goods is 
a selling expense. At closing time, the Insurance Prepaid account must be adjusted, and the 
expense accounts charged with the cost of insurance. 

No. 29 May 15 Fill the order from F. H. Randall & Co. 

No. 30 May 15 Received check from F. C. Tenney on account of bill of the 8th. Enter 

the amount in the first and third columns. 

No. 31 Fifth Report — Prove the cash and prepare the report called for. 

No. 32 May 17 Rice & Pond of Georgetown, Ohio, have sent you an order and have 
given satisfactory references. Bill them the goods at our regular terms. 

These goods are shipped by freight and a shipping order would be filled out and given to 
the railroad company. 

A bill of lading is an instrument issued by the transportation company to a shipper ac¬ 
knowledging the receipt of goods and stating the conditions under which they will be carried. 
The bill of lading is of importance for the reason that its possession is regarded as evidence of 
the ownership of the goods. Because the bill of lading stands for the goods, the title to goods 
in transit often changes hands through the negotiation of the bill. In order to facilitate such 
transfer and avoid loss and misunderstanding, a Uniform Bills of Lading Act was passed by 
Congress in 1908. This act designated two forms of such bills: 

(а) A “straight” bill of lading non-negotiable in form, to be used in connection with direct 
shipments, is made out in sets of three, consisting of the bill of lading, the shipping order, and 
the memorandum acknowledgment. The original of the set, or the bill of lading, is sent to the 
consignee, the shipping order is retained by the transportation company, and the acknowledg¬ 
ment is filed by the consignor. Goods shipped by “ straight” bill of lading may be delivered to 
consignee without surrender of the bill of lading. 

(б) Draft with Attached Bill of Lading. — The principal use of the order bill of lading is 
where the shipper desires to collect from consignee in advance of the delivery of goods to him. 
This is usually known among business men as “Shipper’s Order,” and accomplishes the same 
purpose when goods are shipped by freight, as C. O. D. by express does when shipment is made 
by express. The name of the bank through which the collection is to be made is inserted after 


90 


ELEMENTARY COURSE 


Straight Bill of Lading 


VolfdrmJBiO Of Lading—Standa rd fartno l Straight Bill of Lading approved by the Interstate Commerjee Commission by Order No. 787 of June 27.1908, 

Interstate Transportation Company 

Shippers No. 


STRAIGHT BILITOF LADING—ORIGINAL—NOT NEGOTIABLE, 


Agents No. 


RECEIVED subject to the classifications and tariffs jn effect on the date of issue of this Original Bill of Lading, 

. . 2 ^^^..../..^.- 19 


from./CJ---.the property described below, in apparent good order, except as noted 

(contents and condition of contents of packages unknown), marked,consigned and destined as indicated below, which said Company agrees 
to carry to its usual place of delivery at said destination, if on its road, otherwise to deliver to another carrier on the route to said destinar 
tioh. It is mutually agreed as to each carrier of all or any of said property over all or any portion of said route to destination, and as to 
each party at any time interested in all or any of said “property, that every service to be performed hereunder shall be subject to all the 
conditions, whether printed or written, herein contained (including conditions on back hereof) and which are agreed to by the shipper sndi 
accepted for himself and his assigns. 

The Rate of Freight from _ 


fn _ is in Cents per 100 Lbs. 

IF Special 

per. 

IF Spedsl 

P«. 

IF..Times 1st 

IF . 1st Cist*. 

IF 2nd Cists 

IF Rut* 2B 

IF U Cists 

IF R*ls26 

IF Rul*28 

IF 4th Cists 

IF Btb Cists 

IF 6th Cists 

- 













Consigned to..y.JLr 

Destination, _.. 

Route,__ 




S. _State of... 

Car Initial 


^_County of... 

...Car No. 


NO. 

PACKAGES 

DESCRIPTION OF ARTICLES AND SPECIAL MARKS 

WEIGHT 

(lubjsst Is eorrsctlon) 

CUSS OR 

RATE 

CHECK 

COLUMN 

jul. 

. . .. 

.... .: 

. /.M.tSdQ.. 



.. t.. 




.... jr 

^ ... 

. 

..Jl*jT 



-...cT' 

.. 

..JTJT 








• 


















































If charges are to be 
prepaid, write or stamp 
here, “To be Prepaid,’* 


Receive d $...... 

to apply in prepayment 
of the charges on the 
property described 
hereon. 


Agent or Cashier. 

Per—.. 


(The signature here acknowl¬ 
edges only the amount prepaid.) 


Charges Advanced: 


Per. 


Shipper. 


Agent. 


Per. 


(This Bill of Lading is to be signed by the shipper and agent of the carrier issuing same.) 


“Consigned to Order of” and the name of consignee after “Notify.” A draft is drawn on the 
consignee for the amount of the shipment in favor of the bank and attached to the bill of lading. 
The draft with bill of lading attached is left with the bank for collection. Consignee cannot 
obtain possession of bill of lading unless he pays the draft, and without the bill of lading he 
cannot get possession of the goods. Thus we have C. 0. D. by freight. The invoice is sent to 
consignee in the regular way with terms B. L. S. D. 



























































































MAY 


91 


Order Bill of Lading 


Book Form 44A-Dap. 
10 - 15 - 10 M Seta* 

BID of Lading-Standard form of Order Bill of Lading approved by the Interstate Commerce Commission by Order No. 787 of June 27, 1908. 

Interstate Transportation Company 

Shippers No._ 

Agents No. 


ORDER BILL OF LADJNG-ORIGINAL. 


RECEIVED, subject to the classic-cations and tariffs in effect on the date of issue of this Original Bill of Lading, 


-- 


:.. 191 


at . 

from - /..L.i.vy ,a ,..L —....the property described below, in apparent good ordar, except as noted 

tcontents an<l condition of contents of packages unknown), marked, consigned and destined as indicated below, which said company agrees to carry to 
Ms usual place of delivery at said destination, if on its road, otherwise to deliver to another carrier on the route to said destination. It is mutually 
agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time interested ia 
ail or any of said property, that every service to- be performed hereunder shall be subject to all the conditions, whether printed or written, herein con¬ 
tained (including conditions on back hereof) and which are agreed to by the shipper and accepted for himself and his assigns. 

The surrender of this Original ORDER Bill of Lading properly indorsed shall be required before the delivery of the 
property. Inspection of property covered by this bill of lading will not be permitted unless provided by law or upless permission 
is indorsed on this original bill of lading or given in writing by the shipper. 

The Rate of Freight from _. 



At ... ^ _ State of— r^2LZ... —County of 


Route __—Car Initial_Car No. 


NO. 

PACKAGES 

DESCRIPTION OF ARTICLES AND SPECIAL MARKS 

WEIGHT - 

(Subject to Correction) 

CLASS OR 
RATE 

CHECK 

COLUMN 

If charges are to be 
prepaid, write or stamp 
here “To be Prepaid." 

A'T 


• / 0<S~0 



. X 


.. / oUS~ 



A'T 


.. dLsil 




. 

_ 



Received $ __ _ 

to apply in prepayment 
of the charges on the 
property described 
hereon. 


























Agent or Cashier. 


• 









(The signature here acknowledges 
only the amount prepaid.) 






Charges Advanced: 

% 



F 






— 






V-- 

--—• 


_Shipper. .__A.gent. 

Per -- Per.-—-- 

V (This Bill of Lading is to be signed by the shipper and agent of the carrier issuing same.) 


Transportation companies make out the bills of lading for single shipments, but the busi¬ 
ness house making frequent shipments usually obtains a supply of the forms from the transpor¬ 
tation company, the forms being made out in the shipping department of the consignor. The 
two forms of bills of lading are shown on the preceding pages. 


































































































































92 


ELEMENTARY COURSE 


No. 33 May 18 Give Westen Tea & Spice Co. a check for. $800 to apply on account of 
invoice of the 5th. Enter the amount in the first and third columns. 

No. 34 May 18 A telegraph order has been sent to West, Stone & Co. for certain mer¬ 
chandise which is needed immediately. Pay the charge of 50^ for the telegram in currency, 
and make proper entry. 

No. 35 May 20 Fill the order of E. Mason & Co. of Milford, Ohio. Terms: 30 days net. 

No. 36 May 20 Pay Allen & Parker’s bill by check. As this is an item of expense in¬ 
curred in connection with the real estate, debit Real Estate Expenses. 

B. P. 38. — Debit Real Estate Expenses with the expenses due to the maintenance of real 
estate used for business purposes. 


No. 37 May 20 Received note from Dickson & Young to apply on account. 

No. 38 May 20 Fill Dickson & Young’s order of this date. Terms: On account. 

No. 39 May 21 Telegraph order from James H. Vincent; bill the goods net cash. The 
goods are sent by express collect. • 

No. 40 May 22 Fill Rice & Pond’s order. Terms: On account. Make entries for the sale 
and for the check received on account. Enter the amount of the check in the first and third 
columns. 

No. 41 May 23 Invoice of West, Stone & Co. for goods ordered on the 18th. 

No. 42 May 23 Invoice of Charles K. Fox. 

No. 43 May 23 Cash sale to G. H. Thomas of a sample lot of goods. As this sale is not 
to a regular customer, make the entry directly in the cash book. 

Make no entry in the sales journal. (B. P. 9.) 

No. 44 May 23 Sixth Report. 

No. 45 May 24 The express company remits for the goods shipped to J. H. Vincent on 
the 21st by express money order, less 25^, their charge for collection. 

On the receipts side of the cash book, credit Vincent for the amount of the bill, $10; on the 
payments side of the cash book, debit General Expenses for 25^, the amount charged for collec¬ 
tion. The difference between the two entries equals the amount of the money order. Express 
money orders are treated as cash, and may be deposited with checks and other cash items. 

No. 46 May 24 A telegraph order has been sent to L. Hennes & Co. for certain merchan¬ 
dise which is needed immediately. Pay the charge for the telegram, 35^, in currency. 

No. 47 May 24 Fill this order from A. A. Knowles & Co., at the usual terms. 

No. 48 May 25 Deposit the checks and money order on hand, and $100 in currency. 

No. 49 May 25 Send Westen Tea & Spice Co. check for $400 to apply on account. 

No. 50 May 26 Invoice of L. Hennes & Co. ordered on the 24th. 

No. 51 May 26 Fill the telegraphic order from E. Mason & Co. at usual terms. 

No. 52 May 26 Received check from A. A. Knowles & Co. in payment of note due to-day 
with interest. 

Note that the check is for a larger sum than the note. The difference between the face of 
the note and the face of the check represents the amount earned by the business as interest. 
Verify the calculation by finding the interest on $500 for 20 days, the time the note had to run. 

Remember to credit Notes Receivable, not for the amount of the check, but for the face of 
the note. 


B. P. 39. — Credit Interest ON Notes Receivable with interest received on notes , loans, 
and overdue accounts. 

This transaction requires two entries in the cash book, both on the receipts side. Credit 
Notes Receivable for the face of the note; credit Interest on Notes Receivable for the interest. 


MAY 


93 


No. 53 May 26 Pay the invoice of Charles K. Fox of the 23d by check, less discount. 

No. 54 May 26 Fill the order from S. E. Kingsley, a new customer. Usual terms. 

No. 55 May 27 Received check for $600 from A. A. Knowles & Co. to apply on bill of the 
24th. The terms of sale were 2/10, n/30, and as the term of discount has not yet expired, they 
ask to be allowed 2% discount on as much of the bill as this check will pay, as they are unable 
to pay the entire bill at this time. 

In this transaction $600 is the amount left from a certain sum after 2% has been deducted, 
or $600 is 98% of the amount which should be credited to A. A. Knowles & Co. $600 divided 
by 98% will give the amount of the credit, and the discount will be the difference between $600 
and the quotient obtained. To prove the accuracy of your division, take 2% of the amount 
you find. It should equal the discount. Enter in the cash receipts column, $600; in the Dis¬ 
count on Sales column, $12.24; in the Accounts Receivable column, $612.24. 

No. 56 May 28 Fill order from E. Mason & Co.; usual terms. 

No. 57 May 28 Invoice of merchandise received from Charles K. Fox. 

No. 58 May 28 Received check from S. E. Kingsley for the trial shipment of the 26th, 
less discount. 

Credit Kingsley for the face of the bill. Refer to your sales book entry for the amount. 

No. 59 May 29 Invoice received from West, Stone & Co. 

No. 60 May 29 Send a check for $500 to Shields Bros, to apply on account of invoice of 
the 6th inst. 

No. 61 May 30 Pay bill of the City Carting Company by check. (B. P. 11.) 

No. 62 May 31 Note received from A. W. McKey with interest to apply on his account. 

A. W. McKey’s account is due and payable. He postpones payment but gives his note. 
The business is entitled to receive interest on overdue accounts. 

No entry for interest as no interest is received at this time. 

No. 63 May 31 Deposit all checks and currency on hand. 

No. 64 May 31 Pay invoice of West, Stone & Co. of the 22d, less discount. 

No. 65 May 31 Mr. Adams has withdrawn on memorandum during the month for his 
personal use, merchandise to the amount of $30. (B. P. 18 and 19.) 

No. 66 May 31 Draw a check in favor of Pay Roll for $200, covering expenses of clerks 
for the month. 

B P jo. — Debit Selling Expense with all expenses incurred directly in the sale of mer¬ 
chandise, including wages of clerks, advertising, salesmen's salaries, traveling expenses, delivery ex¬ 
penses, etc., unless separate accounts are kept for such expenses. 

Draw a check for your own salary for the month. (B. P. 3.) 

Mr. Adams allows himself a salary of $200 monthly against which he draws for personal 
and family expenses. He does not wish to draw the money due on this account now, but an 
entry must be made showing that it is due him and that the business has incurred that expense. 
Make the entry in the journal. 

B P 4 i' _ Credit the Proprietor's Personal account with monthly salary allowance, unless a 

separate Salary account is kept. 

No. 67 May 31 Pay the following expense bills for the month of May by check: Cen¬ 
tral Telephone Company, $5.60; City Gas and Electric Company, $8.75. Make two entries. 

(B. P. 3.) 

No. 68 May 31 

Adjusting Entries. — An adjusting entry is an entry made for the purpose of modifying an 
account so that it will show the actual profit or loss during the period ended, or the actual asset 
or liability at the time of making the adjustment. 


94 


ELEMENTARY COURSE 


No matter when the books are closed, it will always be found that some items of expense 
or income will be paid beyond the date of closing; while other items of expense incurred will 
not have been paid, and other items of income earned will be unpaid. 

The insurance premiums were paid ahead for one year at the time the policies were taken 
out. Now the premiums are paid ahead for eleven months, and since the whole amount was 
charged to an asset account in the first place, the portion used must now be charged to a loss 
account. 

Of the total premiums, $200, $120 was on real estate and $80 on stock, so that real estate 
expenses should now be charged with one month’s insurance at the rate of $120 a year, or $10. 

Similarly, selling expenses should be charged with one month’s cost of insurance at the 
rate of $80 a year, or $6.67. The sum of these amounts should be credited to Insurance Pre¬ 
paid, after which the difference between the two sides of the account will show the amount of 
premiums still prepaid. 

B. P. 42. — Credit Insurance Prepaid, at the end of a business period , with the cost of in¬ 
surance during that period. 

Make an entry in the journal debiting Real Estate Expenses for $10, Selling Expenses for 
$6.67, and crediting Insurance Prepaid for $16.67. 

On May 5 interest was paid on a note due September 5. Thus, the expense of procuring 
the money is paid ahead from May 31 until September 5, or for ninety-seven days. The first 
cost of interest on the note was $102.50. The interest for ninety-seven days is $80.83, and is 
paid in advance at this date. It is therefore an asset. In order to show the cost of interest for 
the period just closing, it is necessary to make an adjustment, transferring the amount paid in 
advance to an asset account. 

B. P. 43. — Debit Interest Prepaid on Notes Payable , at the end of a business period, 
with the amount of interest prepaid on our own notes. 

Make a journal entry debiting Interest Prepaid on Notes Payable and crediting Interest 
on Notes Payable for $80.83, with proper explanation. 

Depreciation. — Buildings, Fixtures, Machinery, in fact everything that is capable of 
being used, change in value with the use and the passage of time. Usually the change is one of 
decreasing value. A piece of equipment used day after day constantly declines in market value, 
and ultimately wears out or has to be discarded because some other type of equipment is so 
much superior in time and labor saving. 

This wearing process may not involve the expenditure of money until the article is finally 
discarded, but it is nevertheless going on. It would be unwise, in some cases ruinous, for a 
business to ignore this factor of the cost of doing business. Hence, at closing time this esti¬ 
mated loss through depreciation should be shown on the books. It may be shown through a 
depreciation account, or if no depreciation account is kept, then the depreciation is charged 
through the various expense accounts. In this work depreciation will be charged through the 
General Expenses account. 

The estimated depreciation of Furniture and Fixtures for the month of May is 10% of the 
cost. Make an entry in the journal, debiting General Expenses, and crediting Furniture and 
Fixtures for the proper amount. 

See note, page 79. 

No. 69 May 31 Retain the bank statement until instructed as to its disposal. 

No. 70 May 31 Seventh Report — Prepare the report called for, have it verified, and 
hand in all outgoing papers — cash, checks, sales, notes payable — remaining in your files. 


MAY 


95 


» 


CLOSING THE BOOKS 

Now that the transactions for May have all been recorded in their proper books, the next 
work is the closing of the books of original entry, posting from those books to the ledger, tak¬ 
ing a trial balance, preparing financial statements, closing the ledger, and preparing statements 
of accounts. This work is all of great importance and should be performed with attention to 
all details and with a clear understanding of each step. Pay careful attention to the instruc¬ 
tions. 

1 Balance the cash book. Be sure to show the footings of the special columns properly 
and to have all rulings as they should be. Study the model, pages 81-82. 

2 Foot the Purchases Journal. 

3 Foot the Sales Journal. 

4 Have the totals verified. 

5 Open accounts in the ledger, beginning on the first right hand blank page in Blank No. 
4, allowing one-half page for all accounts , except as otherwise noted . 

Assets: 

Cash 

Notes Receivable 

Accounts with customers (alphabetically arranged) 

After opening all accounts with May customers, leave three pages blank for additional ac¬ 
counts with customers in June. 

Real Estate 
Furniture and Fixtures 
Insurance Prepaid 
Interest Prepaid on Notes Payable 

Liabilities: 

Notes Payable 

Accounts with creditors (alphabetically arranged) 

Leave three blank pages after the accounts with May creditors for accounts with addi¬ 
tional creditors in June. 

Proprietary Accounts: 

Henry F. Adams, Capital 
Henry F. Adams, Personal 

Leave a blank page after the two accounts with Mr Adams. 

Trading Accounts: 

Sales 

Purchases 

Freight and Cartage (one-fourth page) 

Inventory (Asset) (one-fourth page) 

Operating Expenses: 

Selling Expenses 

General Expenses (one page) 

Real Estate Expenses 


96 


ELEMENTARY COURSE 


Other Income Accounts: , 

Interest on Notes Receivable 

Discounts on Purchases 

Other Expense Accounts: 

Interest on Notes Payable 

Discounts on Sales 

Leave three blank pages. 

Summary Account: 

Profit and Loss 

6 Index all ledger accounts, using the pages provided for that purpose. The index pages 
are in double column. Allow one-third column for each letter of the alphabet. Group I and 
J together. In indexing proper names, use the Directory style, last name first, as Bowen, 
Thomas W. 

7 The student is now ready to post. Debit the personal accounts named for all transac¬ 
tions recorded in the sales book; credit Sales for the total. From the receipts side of the cash 
book, credit the personal accounts named for all transactions recorded in the Accounts Receiv¬ 
able column (make sure that every credit to a customer is in the Accounts Receivable column, 
whether there was a discount or not). Credit all other accounts with the amounts in the net 
receipts column. Debit Discounts on Sales with the total shown by that column. Debit Cash 
for total receipts. 

Credit the personal accounts named for all transactions recorded in the purchases journal; 
debit Purchases with the total. From the payments side of the cash book, debit the personal 
accounts named for all transactions recorded in the Accounts Payable column. (Every debit 
to a persona] account should be recorded in the first column, whether there was a discount or 
not.) Debit all other accounts with the amounts shown in the net payments column. Credit 
Discounts on Purchases with the total of that column. Credit Cash with the total payments. 
Post the journal in the usual manner. 

In the ledger folio column indicate the book from which the posting is made, as instructed 
in April. 

8 Check the posting. 

9 Rule all personal accounts which balance. 

10 Take a trial balance. 

11 When the trial balance has been approved, copy it on the first blank page following the 
proof trial balance for April. 

12 Prepare a Profit and Loss statement. There are six new accounts on the May state¬ 
ment — Selling Expenses, Interest on Notes Payable, Discounts on Sales, Interest on Notes 
Receivable, Discounts on Purchases, and Real Estate Expenses. See illustration for the ar¬ 
rangement of the Profit and Loss statement for May. 

The merchandise inventory is 13372.55. 


MAY 


97 


JOHN C. COLLINS 


Profit and Loss Statement, May 1-31, 

19— 


Sales 


$12365.72 

Deduct Cost of Goods Sold: 

Purchases 

$15680.75 


Freight and Cartage 

116.87 

$15797.62 


Less — Inventory, May 31 

6280.25 

9517.37 

Gross Profit on Sales 


$2848.35 

Deduct Operating Expenses: 

General Expenses 

567.95 


Selling Expenses 

348.72 


Real Estate Expenses 

197.65 

1114.32 

Net Profit on Operations 


$1734.03 

Add Other Income: 

Discounts on Purchases 

$167.89 


Interest on Notes Receivable 

23.56 

191.45 

$1925.48 

Deduct Other Expenses: 

Discounts on Sales 

$83.49 


Interest on Notes Payable 

67.94 

151.43 

Net Profit 


$1774.05 


13 Prepare a Balance Sheet. New accounts are Real Estate, Furniture and Fixtures, In¬ 
surance Prepaid, Interest Prepaid on Notes Payable. See that the statements agree. The dif¬ 
ference between the assets and liabilities must equal the investment (plus the personal account 
credit) increased by the net profit. 

14 When the Profit and Loss statement and the Balance Sheet have been approved, copy 
them in Blank No. 3, following the trial balance. 

15 Make closing entries on loose journal paper. 

(а) Set up the Inventory account. (B. P. 20 and 21.) 

(б) Close Freight and Cartage into Purchases. (B. P. 22 and 23.) 

(c) Close Purchases into Sales. (B. P. 24 and 25.) 

(d) Close Sales into Profit and Loss. (B. P. 26 and 27.) 

Follow the Profit and Loss statement in detail. Closing entries must satisfy three condi¬ 
tions: The entries themselves must have equal debits and credits; they must balance the ac¬ 
counts intended to be closed; and they must conform to the results shown by the Profit and 
Loss statement. 

( e ) Close the Interest on Notes Receivable and Discounts on Purchases accounts into 
Profit and Loss. 

B. P. 44. — Debit Interest on Notes Receivable at closing with the profit shown by that 
account. (Credit Profit and Loss.) 

B. P. 45. — Debit Discounts on Purchases at closing with the profit shown by that 
account. (Credit Profit and Loss.) 












98 


ELEMENTARY COURSE 


The entry may be compound in form, as: 

Interest on Notes Receivable 

Discounts on Purchases 
To Profit and Loss 

(/) Close all the losses into Profit and Loss, using a compound entry. (B. P. 29.) 

B. P. 46. — Credit Selling Expenses at closing with the loss shown by that account. {Debit 
Profit and Loss.) 

B. P. 47. —- Credit Real Estate Expenses at closing with the loss shown by that account. 
(Debit Profit and Loss.) 

B. p. 48. — Credit Interest on Notes Payable at closing with the loss shown by that 
account. (Debit Profit and Loss.) 

B. P. 49. — Credit DISCOUNTS ON Sales at closing with the loss shown by that account. 
(Debit Profit and Loss.) 

(g) Close the balance of the Profit and Loss account into H. F. Adams* personal account. 

If the entries have been properly made, the balance of the Profit and Loss account will be 

the net profit. 

(h) Make an entry to transfer the balance of Mr. Adams* personal account into his Capi¬ 
tal account. 

15 When the closing entries have been approved, copy them into the journal and post 
them. Foot and rule the trading accounts, and all other accounts which show a profit or a loss, 
including the Profit and Loss account. Rule H. F. Adams* Personal account; balance the Capi¬ 
tal account and the Cash account. 

16 Take a proof trial balance and copy it following the balance sheet. 

17 Prepare a monthly statement for each customer that owes the business on account. 

18 Submit your books for examination. 

19 You may now look up voucher No. 69, which is your last incoming voucher for May. 
This is the statement rendered to Mr. Adams by his bank for the month. 

The column headed “Deposits** shows the date and the amount of each deposit made dur¬ 
ing the month, together with the proceeds of the note discounted on May 5. The column 
headed “Checks Paid** shows the amounts and dates of payment of all checks drawn by Mr. 
Adams during the month and paid by the bank. The column headed “Balance** shows the 
balance in bank at the time of rendering the statement. 

Receive from the instructor the canceled checks drawn against Mr. Adams* account dur¬ 
ing the month, with the exception of four checks which, according to the statement, are out¬ 
standing; that is, they have not been deposited or cashed by the payees. The checks returned 
to you should agree with those listed in the Checks Paid column. 

Verify the canceled checks with your stubs. Prepare a statement reconciling the bank 
balance with the balance shown by your check book. (See page 65 for form of statement re¬ 
quired.) If your statement agrees with the balance as shown by your check book, copy it on 
the reverse side of your check book stub. 

Attach the canceled checks to the bank statement, and file in the Voucher File. 



MAY 


99 


REVIEW QUESTIONS 

1 Explain two different methods of recording purchases. 

2 Why are purchases of furniture and fixtures, office supplies, etc., not recorded in the' 
purchases journal? 

3 When there is a choice of payment, which date should be recorded in the “When Due’* 
column of the purchases journal? 

4 Explain how the purchases journal is a form of journal. 

5 How is the detailed record of the purchases kept? 

6 How does the bookkeeper keep a record of the items sold to a customer? 

7 How are postings made from the purchases journal? 

8 What is the advantage of special columns in books of original entry? 

9 What is a contra entry? 

10 What is shown by the balance of the Insurance Prepaid account? 

11 Explain two methods of recording discounts. 

12 What is a bill of lading? 

13 What is the difference between a straight bill of lading and an order bill of lading? 

14 What is the purpose of adjusting entries? 

15 What should the balance of a real estate account show? 

16 To what account should repairs to real estate be charged? 


Exercise 12 

On loose ledger paper, open the following accounts: General Expenses, Selling Expenses, 
Real Estate Expenses, Interest on Notes Receivable, Interest on Notes Payable, Discounts on 
Sales, Discounts on Purchases. 

Enter the following transactions under the proper accounts. 

June 1 Paid for office supplies, $27.50. 

2 Paid advertising bill, $36.80. 

3 Paid water rent, $10.75. 

4 John Smith paid his interest-bearing note, interest, $7.50. 

5 Paid our interest-bearing note favor of Thomas W. Bowen, interest, $6.75. 

6 Borrowed money from the bank on our 60-day note; interest^paid in advance, $105. 

8 Paid clerks’ wages, $175; stenographer, $25; bookkeeper, $30*; electric light bill, $8.25; 
traveling expenses, $12.60. 

9 Paid invoice of James Anderson, less discount of $14.75. Received payment for bill of 
goods sold to A. W. McKey, less discount of 013.50. 

10 Paid for office supplies, $16.85; telephone bill, $4.80. 

11 Received payment of A. A. Knowles & Co.’s note with interest, $7.35. 

12 Paid for repairs on building, $28.90; repairs to typewriter, $3.80. 

13 Received payment for F. C. Tenney’s interest-bearing note, interest, $13.80. 

15 Paid clerks’ wages, $175; stenographer, $25; bookkeeper, $30; invoice, of City Mills 
Co., less discount of $19.50. 

16 Discounted our note at bank, interest paid in advance, $50. 

17 Paid for stationery, $17.50; invoice of West, Stone & Co., less discount, $24.30. 

18 Received payment of Rice & Pond’s note with interest, $4.95; payment of bill sold to 
D. W. Perry & Co., less discount of $14.40. 


100 


ELEMENTARY COURSE 


19 Paid for telegram, 50^; for cleaning office windows, $3.50. 

20 E. Mason & Co. paid their interest-bearing note, interest, $7.80. 

22 Paid clerks’ wages, $175; stenographer, $25; bookkeeper, $30. 

23 Paid for repairs to roof, $26.30. 

24 Paid interest-bearing note favor Shields Bros., interest, $9.20. 

25 Paid invoice of City Mills Co., less discount of $23.70. 

26 Paid advertising bill, $17.50. 

27 Received payment of Thomas W. Bowen & Co.’s interest-bearing note, interest, $7.15. 

29 Paid clerks’ wages, $175; stenographer, $25; bookkeeper, $30. 

30 Paid traveling expenses, $37.80; delivery expenses, $76.90. 

Foot the accounts and present for approval. 


Exercise 13 

It is desired to close the books July 31, 19— at which time the following adjustments are 
to be made. 

(а) July 1, the business discounted a note at bank, face of note $6000, time to run 93 
days. The interest was paid in advance. Required an entry to adjust Interest on Notes Pay¬ 
able account so that it will show the cost of interest for the current period. (B. P. 43.) 

(б) The business holds an interest-bearing note made by A. W. McKey, for $800, dated 
May 1. No adjustment of interest has been made on this note. Make an entry to show the 
amount of interest earned at the time of closing. 

Debit Interest Accrued on Notes Receivable; credit Interest on Notes Receivable. The 
interest has not been paid and will not be paid until the maturity of the note, but interest has 
accrued from the date of the note until July 31. 

(c) A bill for sales slips amounting to $23.50 (Selling Expenses) was charged by mistake 
to General Expenses. Make an entry to correct the error. 

(d) A payment of $500 which should have been credited to A. W. McKey was credited to 
D. W. Perry & Co. Make an entry to adjust the error. 

(e) July 1, an insurance policy was taken out on the stock of goods, premium $180 for one 
year. The cost of the premium was charged to Insurance Prepaid. Make an entry which will 
show the value of insurance prepaid at the end of July, and the cost of insurance for the month. 
(B. P. 40 and 42.) 

(/) A policy on real 'estate was also taken out July 1, premium $240. This premium was 
charged at the time to Real Estate Expenses. Make an entry to show the amount of insurance 
prepaid for this policy, and which will adjust the real estate expenses account to show cost of 
insurance for the month. 

(g) A bill to Fletcher Bros, was entered in the sales journal as $675.90; it should have 
been $765.90. Make an entry to correct the error. 

(h) An entry was made in the cash book, crediting Rice & Pond for $575. The entry 
should have credited Notes Receivable for $560 and Interest on Notes Receivable for $15. 
Make an entry to adjust. 

Submit your entries for approval. 


MAY 


101 


Exercise 14 

The following trial balance was taken from the books of Elmer Davis, December 31, 19—. 


Cash.....$ 

Notes Receivable... 

Accounts Receivable..... 

Real Estate........ 

Furniture and Fixtures...,,,. 

Insurance Prepaid.. 

Notes Payable.... 

Accounts Payable...:. 

Elmer Davis, Capital. 

Elmer Davis, Personal. 

Purchases.I..... 

Freight and Cartage... 

General Expenses... 

Selling Expenses.... 

Real Estate Expenses..... 

Discounts on Sales. 


5162.85 

1789.65 

5368.90 

9000. 

315. 

275. 


87.50 

8248.75 

116.80 

416.10 

575. 

163. 

86.90 


Sales. 

Interest on Notes Receivable. 
Discounts on Purchases. 


$ 7000. 
4685.17 
10000. 


9664.38 

43.50 

212.40 


$31605.45 $31605.45 


Inventory of goods on hand, $1000.47. 

Prepare a Profit and Loss statement, and Balance Sheet. Make closing entries. Close 
Profit and Loss into the Proprietor’s Personal account. Make an entry to close the balance of 
his personal account into his capital account. 


EXERCISES PREPARATORY TO THE JUNE WORK 
INTEREST AND DISCOUNT 
Exercise 15 

Take a double sheet of three-column journal paper and indicate columns for a cash book 
as follows: On the receipts side, Notes Receivable, Discount on Notes Receivable, and Net 
Cash. On the payments side, Notes Payable, Discount on Notes Payable, and Net Payments. 

Remember that only discounts can be entered in the Discounts column. Interest must be 
entered in the Net column. 

A commercial bank will buy the Notes Receivable of its depositors. This is an accommo¬ 
dation to the depositor, because it enables him to turn the notes into cash before maturity. 
It is a profit to the bank, because it collects from the depositor in advance interest on the note 
for the time which it has yet to run. This profit to the bank is, of course, a loss to the deposi¬ 
tor, but if the latter needs the money he is willing to pay for the use of it. 

The bank will also lend money on the depositor’s Notes Payable, properly secured. 
Whether the bank buys the notes held by the depositor, or the notes made by the depositor, 
the discount calculation is the same — on the face of the note for the time it has yet to run. 
Of course, if the note is interest-bearing, the interest for the full term of the note must be first 
added to the face, because the interest continues to accumulate during the life of the note, re¬ 
gardless of any other condition. 























102 


ELEMENTARY COURSE 


Occasionally a depositor may borrow the face of an interest-bearing note, paying the inter¬ 
est when the note matures, but the banks prefer, and generally obtain, interest in advance. 

Counting Time. — Commercial paper usually runs for a short term, rarely more than 120 
days. There are several methods of counting time. Suppose it is desired to count the time^ 
from March 28 to September 9. If the exact number of days is counted, there are 165, but if 
compound subtraction is used (counting 30 days to the month) there are only 161, while if the 
time is counted by months and days there are 162 days. (From March 28 to August 28, 5 full 
months, 150 days. From August 28 to September 9, 12 days; total 162.) 

Banks invariably count the exact number of days in calculating discounts. If the time on 
an interest-bearing note is expressed in months, it is usually counted on the basis of 30 days to 
the month. 

In the following problems the rate is 6%. 

May 1, 19— You are having D. H. Farley’s note for $1200, of this date, at 4 months dis¬ 
counted at bank. Calculate the discount for the exact number of days from May 1 to Septem¬ 
ber 1, the date of maturity. 

Debit Discount on Notes Receivable for the discount. Enter the face of the note in 
Notes Receivable column, the discount in Discount column, and the proceeds in Net Receipts 
column. 

What are the debits and what is the credit? 

May 2 You discount L. E. Pearson’s note for $4500, dated to-day, payable at the City 
Bank in 90 days. Calculate the discount and make the entry. 

This transaction is similar to the preceding one. 

May 3 You have on hand H. G. Smith’s note for $800, dated Jan. 16, at 4 months. Have 
it discounted at the City Bank. Calculate the discount and make the entry. 

Remember that the discount is calculated for the time which the note has yet to run. The 
note matures May 16, therefore the term of discount is 13 days. Debit Discount on Notes Re¬ 
ceivable. 

May 4 You have outstanding a note in favor of Reed & Barton, dated April 25, at 3 
months, for $950. Pay it to-day, less discount for the unexpired time. 

By paying the note before maturity, you save the interest for the time the note has yet 
to run. Calculate the discount from May 4 to July 25. Credit Discount on Notes Payable. 
Enter the note at its face value. 

May 5 You have on hand J. B. Freeman’s note for $728.50, dated April 5, at 4 months. 
He pays it in cash, less discount for the unexpired time. Calculate the discount and make the 
entry. 

By paying the note before maturity, Freeman saves the interest from May 5 to August 5. 
Debit Discount on Notes Receivable for the discount. 

May 5 You have on hand J. C. Sanderson’s note for $2400, dated April 5, due 30 days 
from that date with interest. He pays the note and interest. Calculate the interest and make 
the entry. 

Your interest income is $12 for 30 days. Credit Interest on Notes Receivable, entering 
the interest separately in the Net Receipts column. 

May 5 Paid cash for your 6-month note, due to-day, favor Clark & Harris, for $1000, with 
interest. Calculate the interest and make the entry. 

This transaction is the reverse of the preceding one. Interest costs you $30 for 6 months. 
(Use 180 days.) Debit interest on Notes Payable, entering the interest separately in the Net 
Payments column. Enter the note at its face value. 


MAY 


103 


May 7 You have on hand C. B. Fenner’s note for $1100, dated April 25, at 90 days. Have 
it discounted at bank. Calculate the discount and make the entry. 

This is similar to transaction of May 1. Calculate the discount for the time the note has 
to run. 

May 7 You have outstanding a note in favor of Charles Langdon for $1200, dated April 
20, at 4 months. You pay the note, less discount for the unexpired time. Calculate the dis¬ 
count and make the entry. 

This transaction is the reverse of the preceding one. You save interest on $1200 from 
May 7 to the date of maturity. Credit Discount on Notes Payable. 

May 8 D. W. Evans & Co. owe you a note of $7000, dated April 30, at 4 months. They 
pay the note to-day, less discount. Calculate the discount and make the entry. 

May 9 You have on hand Sam F. Curtis’ note for $1200, dated April 20, at 60 days with 
interest. Have it discounted at bank. Calculate the interest for 60 days; calculate the dis¬ 
count, and make the entry. 

This is an interest-bearing note. At maturity it will be worth its face plus the interest for 
60 days. When discounting a note, always find the maturity value as a first step. Of course, 
if it is a non-interest-bearing note, the maturity value will be the face value, but if it is an 
interest-bearing note, find the interest for the full term of the note. The maturity value of 
this note is $1200 plus the interest for 60 days. Upon this total, calculate the discount for the 
time the note has yet to run, from May 9 to June 19. 

The interest is greater than the discount; and, while both may be recorded, it is only 
necessary to make one entry, crediting Interest on Notes Receivable for the difference. 
Credit Notes Receivable for the face of the note; credit Interest on Notes Receivable for the 
excess of interest over discount. 

May 10 You have outstanding a note for $1500 in favor of Barnes Bros., dated April 17, 
at 90 days with interest. You pay the note on the basis of bank discount. 

Calculate the interest for 90 days. Add the interest to the face of the note. Calculate the 
discount upon the amount from May 10 to the maturity of the note. 

Debit Notes Payable with the face of the note; debit Interest on Notes Payable for the 
excess of interest over discount. 

May 12 You have on hand note of the Allen Chemical Co. for $2650, dated April 12, at 4 
months with interest. Have it discounted at the City Bank, and make the cash book entries. 

This transaction is similar to that of May 9. 

May 12 O. M. Curtis gave you a note March 13, at 60 days, for $890.75, with interest. 
The note is due to-day and Curtis pays you face and interest. Calculate the interest and make 
the entry. Credit Interest on Notes Receivable. Do not use the special column. 

May 14 Your note for $746 in favor of G. W. Longley, dated Feb. 14, at 3 months with 
interest, is due to-day. Pay the note and interest. Calculate the interest and make the entry. 
Debit Interest on Notes Payable. Do not enter in special Discount column. 

May 14 A. S. Hewitt’s note of March 14, at 2 months, for $722.87 with interest, is due 
to-day. They pay the note and interest. Calculate the interest and make the entry. 

May 15 You have on hand note of E. C. Ayer, dated to-day, for $825, at 3 months. Have 
it discounted at City Bank. Calculate the discount and make the entry. 


104 


ELEMENTARY COURSE 


DRAFTS —BILLS OF EXCHANGE 

A bill of exchange is an unconditional order in writing, addressed by one person to another, 
signed by the person giving it, requiring the person to whom it is addressed to pay on demand 
or at a fixed or determinable future time a sum certain in money to order or bearer. (Uniform 
Negotiable Instruments Law.) 

A bill of exchange is commonly called a draft. It will be seen from the above definition 
that there are three parties, technically, to a draft. The drawer is the one who orders; the 
drawee is the one upon whom it is drawn; the payee is the one to whom it is payable. The 
drawer of a draft usually draws it in favor of himself, or in favor of his collecting agent, in 
which case there are actually but two persons involved in the transaction. 

Two-Party Sight Draft. — With regard to time of payment, drafts may be “at sight,” 
“after sight,” or “after date.” 

A bill of exchange may be termed a sight draft if it is payable on presentation. (See 
illustration.) 


Two-Party Sight Draft 




cTcT 


St. Louis , Mo. v __ 19. 


Order of 






Pay to the 




Dollars ' 


Value received and~charge the same to account of 

To - > 0-^7 ^ 

No _ 


In the above draft Rice Bros. & Co. are the drawers and the payees, having drawn the 
draft in favor of themselves. The demand is made upon E. M. Leach, who is therefore the 
drawee. What are the relations between these two parties? Leach is indebted to Rice Bros., 
and the latter take this means of collecting the account. It may be an old account which Rice 
Bros. & Co. have been unable to collect by ordinary methods, or it may be the outcome of a 
recent sale to Leach in which the terms agreed upon were “sight draft.” 

Rice Bros. & Co., having drawn the draft, will in the usual course leave it at their bank 
either for collection and credit or for credit and collection. In the former case they receive no 
credit at the time of leaving the draft at bank. The bank presents the draft, either through its 
own collecting department, or through an agent bank, to Leach. Although the draft is payable 
at sight, Leach has twenty-four hours in which to examine his account with the drawer and 
decide whether he will honor (pay) the draft or not. If he pays the draft, the collecting bank 
credits the account of the drawer for the amount. If he refuses to pay, the bank returns the 
draft dishonored to the drawer. 



















NOTES AND DRAFTS 


105 


If the draft is deposited for credit and collection, it goes through the same routine. If 
the draft is honored, the transaction is ended, but if dishonored the bank returns it to the 
drawer and charges his account with the amount formerly credited to it on account of the 
draft. 

The time of the drawer’s entry will depend upon which of the former methods is used. 
The form will be the same in either case. In the following discussion, it will be assumed that 
the draft is left for collection and credit. 

Rice Bros. & Co., having drawn the draft and left it at the bank for collection and credit, 
will make only a memorandum entry pending the disposal of the draft. When it is reported 
paid, the situation is exactly the same as if Leach had sent Rice Bros. & Co. his check on ac¬ 
count; that is, when the sight draft is paid it is a cash transaction, and the drawer will debit 
Cash and credit the drawee. 

Of course, the drawer may present the draft in person instead of passing it through the 
bank, but that would not affect the entry. 

Two-Party Time Draft. — The two-party time draft originates under the same circum¬ 
stances and is used for the same purpose as the sight draft, but the insertion of the words “30 
days,” or other time, makes a marked difference in the character of the draft. Leach & Co. 
drew the draft because Lacey & Co. owed them. (See illustration.) 


Two-Party Time Draft 


$ 2- "7 k f Brooklyn, N. Y., 








Value received and charge the same to account of 



As the above draft stands, it contains no agreement that Lacey & Co. will pay at the end of 
30 days, or at any other time. There is no contract on the face of the draft. 

Leach & Co., having drawn the draft, present it to Lacey & Co. for their acceptance. That 
is, having made the demand on Lacey & Co., the drawers seek to have Lacey & Co. signify their 
agreement to the demand. This may be done by mail or in person. It may be on the draft 
itself, or it may be a separate writing, but it must be in writing. 

Assuming that the drawer presents the draft to the drawee and the latter is willing to be 
bound by the terms, the drawee writes across the face of the draft what is technically called an 
acceptance, using the word “accepted,” adding the date, the place of payment, and his signa¬ 
ture. (It is not necessary that the place of payment be specified, but it is desirable.) 

When the draft is returned to the drawer accepted, it has all the force of a promissory 
note. The drawer has definitely promised to pay the bill according to its terms. The order 
has been converted into a promise and will be referred to as an acceptance. 

















106 


ELEMENTARY COURSE 


The draft is shown below with the acceptance written upon it. 



The drawer, having received a written promise to pay, debits Notes Receivable and cred¬ 
its the drawee. The drawee, having given his promise to pay, debits the drawer and credits. 
Notes Payable. 

If the draft is written “days after date,” the date of the acceptance is not necessary, be¬ 
cause in that case the acceptance takes effect from the date of the draft. 


THE TRADE ACCEPTANCE 

A trade acceptance is an acknowledgment of a debt by the buyer in favor of the seller for 
merchandise that the seller had placed in the hands of the buyer with which to pay this debt. 
The buyer agrees to pay at a certain date, at his own bank, to the seller, the amount of this 
certain indebtedness by writing across the face thereof, “Accepted,” the date, and the name of 
his own bank and his signature thereon. (See illustration.) 



This varies from the open book account method only in giving the debt a negotiable value. 
In principle the trade acceptance is no different from the two-party draft already consid- 



























NOTES AND DRAFTS 


107 


ered, but its use differs somewhat. The trade acceptance, as will be seen from the definition, is 
issued at the time the sale is made, with the understanding that the proceeds from the resale of 
the goods will be used to pay the acceptance at maturity. It is essentially an instrument of 
credit, whereas the older form is frequently an instrument of collection. Trade acceptances 
have found favor with the banks, and offer certain distinct advantages to the seller. 

1 The seller has satisfactory evidence that the goods are acceptable, since the buyer in 

accepting the draft agrees that the goods have been received and that payment will be made 
as stated in the acceptance. • 

2 The seller has a written promise to pay upon which he can realize cash by discounting 
same at his bank; whereas he finds it very difficult and expensive to borrow money on his open 
book accounts. 

3 If the seller does not need to discount the paper, he knows the exact date upon which it 
will be paid and can therefore govern his business accordingly in anticipation of certain receipts. 

4 In case of failure to pay, the instrument proves itself in a‘court of law. 

Some of these advantages to the seller are not so favorable to the buyer. It makes it diffi¬ 
cult for him to secure adjustments, and he cannot postpone payment easily as is usually the 
case in open book accounts. But, since the buyer is also a seller, he comes to see that the trade 
acceptance is a most useful instrument in the transaction of business. Then, too, the signing 
of a trade acceptance increases the financial standing of the acceptor, because it shows prompt 
paying methods. 

If the volume of business in acceptances is sufficiently large, accounts may be kept under 
the names of Acceptances Receivable and Acceptances Payable. 

Checks, with which the student is already familiar, are bills of exchange always drawn on 
a bank. When a bank draws a check on another bank it is referred to as a bank draft. Bank¬ 
ers are, of course, large users of checks. They may use a Cashier’s check, which is really a 
check on the bank itself, or they may draw checks on a correspondent bank, in which case the 
checks are called bank drafts. 

The depositor frequently exchanges his own check for a bank draft, because the bank draft 
will be received without question where the individual’s check might be refused. 

Suppose Emerson Bros, wish to order goods from the Eastman Kodak Co. to whom they 
are not known. Emerson Bros, may send their personal check with the order. If they do, the 
order is likely to be delayed until the check goes through for collection. To avoid this possibil¬ 
ity, Emerson Bros, decide to use a bank draft, and make out their check as shown in the illus¬ 
tration, specifying to the Cashier, or other official of the bank, that they wish the draft made 
payable to themselves. 













108 


ELEMENTARY COURSE 


If the draft is made payable to the Eastman Kodak Co., there will be nothing on it to 
show that it came from Emerson Bros. 

The bank now draws its check on a correspondent bank, usually in New York, because 
New York is the financial center of the country. This draft is made payable, not to the East¬ 
man Kodak Co., but to Emerson Bros. (See illustration.) 

Emerson Bros, now indorse the draft, making it payable to the Eastman Kodak Co. The 
draft is enclosed with the order, and, since a New York draft is current everywhere, there is no' 
danger of delay pending the collection of the draft. 

Collection and Exchange. — The bank reimburses itself for the cost of forwarding and 
collecting items by charging its customers a small sum. This charge is known as Collection, or 
Exchange, or Collection and Exchange. Members of the Federal Reserve System, however, 
seldom charge their depositors for collecting out-of-town checks. 


Form of Bank Draft 



Certified Checks. — If the depositor wishes to obtain the advantages of a New York 
draft and still have his canceled check from the party to whom he remits, he may accomplish 
it by having his check certified by the bank. 

A certified check is one upon the face of which the bank has written “Certified,” the date, 
and the signature of the proper officer. Such a check is at once charged to the drawer’s ac¬ 
count, since the bank becomes the principal debtor and is bound to pay the check upon presen¬ 
tation. There is no charge for certifying checks, and it is illegal to certify a check unless the 
depositor has funds on deposit to cover the amount. . - 











NOTES AND DRAFTS 


109 


Exercise 16 — Drafts 

1 You drew a sight draft on Emmons, Hyde & Co. for the amount they owe you, $600. 

Write the draft, dating it June 1. The draft may be written in favor of “ourselves” or in 

favor of the Bank which is the collecting agent. If the draft is written in favor of ourselves, it 
must be indorsed. The following form of indorsement should be used: 

Pay Commercial Bank 
for Collection 
(Your name) 

This is a restrictive indorsement, destroying the negotiability of the paper upon which it 
is used. It does not pass title, but shows that the bank is the agent of the indorser. This is 
the preferable form. 

If the draft is written in favor of the bank, it does not require indorsement by the drawer, 
and there is nothing on the draft itself to show that the bank is not the owner of the paper. 

The bank notifies you that the draft has been paid. Make the journal entry. 

The transaction amounts to this: Emmons, Hyde & Co. have paid you cash on account. 

2 George C. Chase owes you $275, which is overdue. You decide to draw at sight for the 
amount, leaving the draft at your bank for collection. 

Write the draft, dating it June 15, naming yourself as payee and indorsing it to Commer¬ 
cial Bank for collection. 

The bank notifies you that payment has been received from Chase, and credited to your 
account, June 18, less a collection charge of 25^. Make the journal entry. 

Charge the collection fee to Collection. Make a compound entry, debiting Cash for the 
amount of the draft, less the collection charge; debit Collection, and credit Chase for the face 
of the draft. 

3 You sold O. H. Waters on May 10 an invoice of goods, amounting to $1200, recording 
the sale in the sales journal. On the same day you drew a 60-day draft in favor of yourself for 
the amount of the invoice, forwarding the draft for acceptance through the Commercial Trust 
Company. The bank secures Waters’ acceptance and notifies you to that effect. 

Write the draft. 

Write the acceptance of O. H. Waters. 

Make the journal entry. 

This is equivalent to receiving a note from Waters on account. The draft does not require 
indorsement, since the bank is not to collect it, but only to secure the acceptance. 

4 Wm. Parsons & Co. have drawn on you at sight as of June 6, 19—, through the Har¬ 
vard National Bank for $650. You pay the draft June 7. 

Write the draft and make the entry of June 7. 

5 F. W. Preston draws a draft on you in favor of himself, at 30 days’ sight, for $200. 

Write the draft and accept it as of June 6. 

Make the entry upon acceptance. 

This is equivalent to giving Preston your note on account. 

6 You receive from P. Kimble & Co. their acceptance at 10 days for the amount they owe 
you, $400. Date of draft, June 10; date of acceptance, June 12. 

Write the draft and show Kimble & Co.’s acceptance. 

Make the journal entry. 

7 On July 15 you receive a bank draft from C. Farnham & Co. for $510, in full payment 
of account. 

Make the journal entry. 


no 


ELEMENTARY COURSE 


8 On May 10 you sold an invoice of goods to Ward Bros, to the amount of 1300, making 
an entry in the sales journal for same. A trade acceptance of the same date, running for 60 
days, was inclosed with the invoice. The acceptance has been returned signed by Ward Bros. 

Make the journal entry. 

9 On May 1 invoice is received from J. C. Dennis & Co. for goods amounting to $915. 
Terms: 1/30. A 30-day draft for the net amount of the bill is also received. The draft is ac¬ 
cepted by you and returned to J. C. Dennis & Co. Assuming that the invoice was entered in 
the purchases journal, make the journal entry for the acceptance. (B. P. 32.) 

The draft is drawn for $915, less 1%, or $905.85. 

10 Desiring to make remittance of $800 to S. A. Dodge & Co., you purchase from your 
local bank a New York draft for that amount, giving a check drawn on the same bank in pay¬ 
ment. Make the entry. 

You have paid S. A. Dodge & Co. cash on account. The fact that you exchanged your 
own check for the bank’s check makes no difference in the entry. 

11 You purchased an invoice of merchandise, amounting to $975.80, from A. H. Wood¬ 
bury. They inclosed a 10-day draft for your acceptance, dated May 5, for the amount of the 
invoice, less 2%. Assuming that the entry was made in the purchases journal for the face of 
the invoice, accept the draft, making it payable at your bank, and make the journal entry. 
(B. P. 7, 32, and 14.) 

12 On May 15 the bank notifies you that the acceptance in favor of A. H. Woodbury was 
presented for payment and that the amount of the draft was charged to your account. 

Make the journal entry. 

When you accepted the draft, payable at your bank, it was equivalent to an order on your 
bank to pay the draft at maturity and charge to your account. On the day the draft became 
due it was equivalent to a check, and the bank paid it as such. 

13 On May 6 you sold Adams & Hackland an invoice amounting to $765.50, which 
amount was entered in the sales book. You enclosed with the invoice for their acceptance a 
30-day draft, dated May 6, for the amount of the invoice, less 3%. On May 8 the draft was 
returned accepted. Make the journal entry. (B. P. 13, 33, and 10.) 

14 On May 12 you discounted the above acceptance at bank, receiving credit for the pro¬ 
ceeds. 

Base your calculations on the face of the acceptance. Calculate the discount for the unex¬ 
pired time. 

Make the journal entry. (B. P. 1, 51, and 17.) 


NOTES AND DRAFTS 


111 


TRANSFERRING ACCOUNTS 

When an account is transferred to a new page, it should be closed, and either the footings 
or the balance carried forward. If the balance is to be transferred, the difference between the 
two sides is written on the smaller side, the account is ruled and footed, and the balance trans¬ 
ferred to the new account. (See illustration.) 



If it is desired to transfer the footings of any account, each footing is written respectively 
on the opposite side of the account; whereupon, the account balances, is ruled, and the two foot¬ 
ings are carried forward with their original debit and credit determination, to the new account. 

An account may be forwarded also by carrying the footings of each side to the corresponding 
side of the new account. (See illustration.) 





—7^r 


*C 


33 


33 /u' 


/?■ 































































































112 


ELEMENTARY COURSE 


ACCOUNTS INTRODUCED IN JUNE 

Good Will. — Good Will is the value placed on the reputation of an established business, 
and its ability to earn profits. 

H. F. Adams has a going business which is worth more than the property and stock of 
goods which he owns. He has built up a reputation among his customers, and they will con¬ 
tinue to do business with him. This intangible asset is known as Good Will. So long as H. F. 
Adams remained the sole proprietor of the business there was no occasion to take account of 
Good Will on the books. In June, however, he admits a partner, who is willing to pay for the 
prestige already established by Mr. Adams. Good Will is usually estimated on the basis of a 
number of years’ average profits. In this instance it is agreed that Good Will shall be valued 
at the difference between $12,000, the amount student pays for a half interest in the business, 
and the net worth of H. F. Adams at closing, May 31. 

The account will show a debit balance and is treated as an asset. It is frequently charged 
off to Profit and Loss over a period of years. 

Fire Loss. — When a loss occurs by fire it may be handled through a Fire Loss account. 
This account will show on one side the losses suffered by fire, and on the other side, the returns 
from insurance and from the sale of damaged goods, in fact, anything that goes toward offset¬ 
ting the loss. 

The balance of the account shows the net fire loss, and is closed into Profit and Loss. 

Discount on Notes Payable. — In this account will be recorded the profit realized by the 
business on account of prepaying its notes payable. 

Entries will appear on the credit side, except at closing or when it is necessary to make an 
adjustment. 

The balance shows a profit and is closed into the Profit and Loss account. 

Discount on Notes Receivable. — In this account is recorded the loss suffered by the busi¬ 
ness on account of discounting its notes receivable before maturity. 

The entries will appear on the debit side, except at closing or when it is necessary to make 
an adjustment. 

The balance shows a loss and is closed into the Profit and Loss account. 


JUNE 


113 


HENRY F. ADAMS & COMPANY — JUNE 

PARTNERSHIP 

Partnership is the relation which exists between two or more persons who unite their capi¬ 
tal, labor c r skill, or some, or all of them, in conducting a business for profit. In the absence 
of specific agreement to the contrary, the rights and duties of the partners and their sharing in 
profits or losses are equal. 

Mr. Adams has succeeded in building up a good business in wholesale tea, coffee, and 
spices, and as he sees the opportunity for still further expansion, he is planning to add a full 
line of standard groceries. To do so, it is necessary that he have additional capital, and he has 
proposed to admit you as an equal partner. 

After giving the matter due consideration and after going over with Mr. Adams the de¬ 
tails of such an arrangement, it is agreed that you are to invest $12,000, thereby acquiring a one- 
half interest in the profits and the assets of the business. This means that the good will of the 
business which Mr. Adams established is estimated to be equal to the difference between the 
amount of his net worth at the end of May and your investment. This is later brought on the 
books by a journal entry, debiting Good Will and crediting Mr. Adams’ Capital account for the 
difference. 

Salary Allowances. — As office manager of the new company you will receive a monthly 
salary of $125, while Mr. Adams’ salary remains at $200 per month. 

The firm name is to be Henry F. Adams & Company. 

The admission of one or more partners does not in any way affect the principles already 
learned in keeping the books of a sole proprietor. The accounts of the additional partner, or 
partners, are kept in the same manner as the account of the sole proprietor. The accounts of 
the different partners must be kept separate. 

Articles of Copartnership. — It is customary and advisable in forming a partnership for a 
written contract to be drawn up, setting forth all the terms of the agreement, and signed by 
the partners. This agreement is legally known as Articles of Copartnership. 

The following illustrates the form of such an agreement: 

Form of Articles of Copartnership 

Articles of Copartnership, made the first day of June, one thousand nine hundred 
and , between John B. Lamson, of Manchester, N. H., of the first part, and Frank W. Gar¬ 
land, of Boston, Mass., of the second part, witnesseth as follows: 

The parties hereunto, having mutual confidence in each other, do this day form with each other 
a copartnership under the firm name of John B. Lamson & Co., for the purpose of conducting a 
wholesale business in tea, coffee, spices, and general groceries, at 241 Chestnut St., Manchester, 
N. H., under the following terms and conditions, to wit: 

First. That the said John B. Lamson of the first part shall contribute the entire resources of 
his late business located at 241 Chestnut St., Manchester, N. H., as shown by his financial statement 
prepared May 81, 19 —, less the liabilities, as shown by that statement, which liabilities are to be 
paid by the firm of John B. Lamson & Co. The total net investment of John B. Lamson, as shown 
by these statements, is $7245. 

Second. The said Frank W. Garland of the second part shall contribute cash to the amount 
of $7245. 

Third. The capital so formed is to be used and enjoyed in common between them for the prose¬ 
cution and management of said business, to their mutual benefit and advantage. 


114 


ELEMENTARY COURSE 


Fourth. Both parties shall devote their entire time to the business, and shall share gains and 
assets equally, and bear losses equally. John B. Lamson is entitled to draw a salary of $225 per 
month, and Frank W. Garland is entitled to draw a salary of $200 per month from the funds of the 
business. 

Fifth. The said John B. Lamson hereby guarantees that all notes and personal accounts due 
John B. Lamson, and invested by him in the firm of John B. Lamson & Co., shall be worth their 
face value, less any regular trade discounts to which they may be entitled. 

In Witness Whereof, the parties hereto have hereunto set their hands and seals, in duplicate, 
the day and year first above written. 

John B. Lamson. [l. s.] 
Frank W. Garland, [l. s.] 

The partnership is formed as of June 1. In your capacity as bookkeeper and office man¬ 
ager, you are to record all transactions for the month of June, after which the books will again 
be closed. 

A partnership agreement should be full and explicit, and many other provisions than those 
stated above may be inserted, as the facts require. 

Books of Account. — The same books of original entry as were used in May will be con¬ 
tinued during June, and two new books will be added. These books are the Notes Receivable 
and Notes Payable books. 

The Notes Receivable book contains a record of notes and trade acceptances received by 
the business; the Notes Payable book contains a record of all notes and trade acceptances 
issued. These books may be used as books of original entry, if desired, or as auxiliary books, 
supplementing the regular books of account. 

If the Notes Payable book and Notes Receivable book are kept as books of original entry, 
of course there is no entry necessary in the journal. In this set they are used as auxiliary (sup¬ 
plemental) books, and the note book record is in addition to the regular journal entry for notes 
received or issued. 

Business Practice. — An important change made in the June work is that the business 
practice is discontinued, no business papers being received or issued; instead, full information 
regarding each transaction will be obtained from the textbook. This change is made because 
it is felt that by this time the student has obtained sufficient practice for the present in han¬ 
dling business papers, drawing checks, making out bills, etc., and that he is now able to con¬ 
centrate his attention more particularly upon the technical phases of bookkeeping and account¬ 
ing. 

Posting. — The student can easily understand how the bookkeeper whose accounts are not 
posted will frequently be placed at a disadvantage. If a customer asks for a statement of his 
account, it would be necessary to go over all the work for the month, or period elapsed since 
closing, to find the debit and credit items affecting such account. The probability of overlook¬ 
ing one or more items is always present, especially if such work is done hurriedly. In a large 
business, with many daily entries, the books must be posted frequently and regularly. Regular 
posting in that case means daily posting. The student should remember that at the time of 
closing the daily routine of the business goes on and must be recorded, which is an added reason 
for keeping all work up to date. 

Only those entries are posted which must be posted individually, such as personal accounts 
and all other accounts for which there is no special book and no special column. The total of 
sales, purchases, cash received and cash paid, discounts on sales, discounts on purchases, etc., 
are not posted until the end of the month. 


JUNE 


115 


New Accounts. — Preparatory to the June posting, the following accounts should be 
opened: An account in the ledger with Good Will, on the page preceding Real Estate; ac¬ 
counts with new customers, immediately following the May customers; accounts with new 
creditors, following the May creditors; an account with Discount on Notes Receivable, line 
30 on the page with General Expenses; an account with Discount on Notes Payable on the 
page with Discounts on Purchases; an account with Fire Loss, on the page preceding Profit 
and Loss; a Capital and a Personal account with the student, on the page following the same 
accounts with Mr. Adams. 


TRANSACTIONS 

June 1 

In beginning the June cash book, bring forward the balance as of May 31, entering it in 
the Net Receipts column. 

Make an entry for your investment of $12,000, crediting your Capital account. 

As your investment of $12,000 entitles you to only a half interest in the business, it is 
necessary to raise the capital account of Mr. Adams to an equal amount. Consult your ledger 
to ascertain Mr. Adams' net worth May 31. The difference between $12,000 and Mr. Adams’ 
net worth, May 31, is the agreed value of the Good Will. Make an entry in the journal, with 
appropriate explanation, debiting Good Will and crediting H. F. Adams, Capital. 

Pay bill of Hatheway Bros., printers, for office supplies, $7.87. 

Buy merchandise of City Mills Company, Brooklyn, amounting to $742. Terms: 3/10, 
n/30. 

June 3 

Pay invoice of L. Hennes & Co. of May 24, less discount. 

Buy merchandise of Reynolds, Davis & Co., $1063.38. Terms: 2/10, n/4 mo. 

June 4 

The firm has outstanding a note for $1505 held by L. Hennes & Co. which is not due until 
July 1. L. Hennes & Co. are willing to accept a check in prepayment of the note and will allow 
us discount for the unexpired time. Calculate the discount for the time between June 4 and 

July 1. 

The business is entitled to the use of this money 27 days longer. If it has sufficient funds, 
however, a saving can be effected equivalent to the interest on $1505 for 27 days. Make the 
cash book entry. 

Charge Notes Payable with the amount of the check in the net payments column. Make 
a journal entry for the discount. 

B P 50 .— Credit Discount on Notes Payable with all discounts earned by prepayment 
of notes payable. 

Debit Notes Payable and credit Discount on Notes Payable with the discount. The cash 
book entry and the journal entry combined debit Notes Payable with the face of the note. 

June 5 

On June 2 you drew a sight draft on Rice & Pond and left it at the bank for collection. 
Rice & Pond have paid you (through your collecting agent; the bank) $265 in cash. Make the 
proper entry. 


116 


ELEMENTARY COURSE 


Sell A. W. McKey, 282 Elm St., City, an invoice of goods amounting to $422.30. Terms: 
1%, 30-day acceptance. 

Make the entry in the sales journal. Assuming that the draft has been drawn on A. W. 
McKey and sent to him for his acceptance, no entry will be made for the latter until notice of 
his acceptance has been received. 

Sell F. C. Tenney, City, an invoice of goods amounting to $278.72. Terms: 3%, 10-day 
acceptance. 

Dispose of as in the preceding transaction. 

Make the following payments: 

Westen Tea & Spice Company, $200, on account. 

Charles K. Fox for invoice of May 28, less 3%. 

West, Stone & Co. for invoice of May 29, less 3%. 

June 6 

The draft drawn upon A. W. McKey for the amount of invoice of the 5th, $422.30, less 
1%, was accepted as of that date. 

The draft was drawn for $418.08, the amount of the invoice, less 1%. The accepted draft 
is equivalent to a promissory note. Debit Notes Receivable for the amount of the acceptance, 
$418.08; debit Discounts on Sales for the 1%, $4.22; and credit A. W. McKey for the amount 
of the bill, $422.30. This is a journal entry. Record the acceptance in the Notes Receivable 
book. 

The draft drawn on F. C. Tenney on the 5th for the amount of your invoice, $278.72, less 
discount, has been accepted. 

The transaction is similar to the preceding one. Credit Tenney for the amount of the 
invoice. Debit Notes Receivable and Discounts on Sales. Record the acceptance in the Notes 
Receivable book. 

Receive invoice from West, Stone & Co., dated June 3, for $1146. Terms: 3%, 10-day 
acceptance. The draft drawn at 10 days for the amount of the invoice, less 3%, accompanied 
the invoice and has been accepted. 

Enter in purchases journal for the full amount of the bill. In accepting the draft you have 
given your written promise to pay. Make a journal entry debiting West, Stone & Co. for the 
amount of the invoice and crediting Discounts on Purchases and Notes Payable. 

Record the acceptance in the Notes Payable book. 

June 7 

Fill order from A. A. Knowles & Co. The invoice amounts to $353.68. Terms: On ac¬ 
count. A check for $600 to apply on account accompanies the order. 

Your bank discounts at 6% the two acceptances received on the 6th from A. W. McKey 
and F. C. Tenney, and places the net proceeds of each to your credit. 

Do not associate these transactions with the transactions with A. W. McKey and F. C. 
Tenney. They are entire y distinct and have no relation whatever to those persons. You 
have an acceptance, dated June 5, to run 30 days, for $418.08. It is now June 7, so the accept¬ 
ance has 28 days to run. Calculate the discount for that time. 

You have another acceptance, also dated June 5, to run 10 days, for $270.36. Calculate 
the discount for the unexpired time. 

Make the cash book entries. Debit Cash and credit Notes Receivable in the net receipts 
column for the proceeds of each acceptance. Make a journal entry for each discount. 


JUNE 


117 


B. P. 51. Debit Discount on Notes Receivable with the amount charged by a bank for 
discounting notes receivable for the business. 

Debit Discount on Notes Receivable and credit Notes Receivable for each discount. The 
combined entries credit Notes Receivable with the face value. 

Mark the acceptances “Discounted at Bank” in the Notes Receivable book. 

June 8 

Pay invoice of City Mills Company of June 1, taking advantage of the discount of 3%. 

Receive invoice of goods from City Mills Company for $1266. Terms: 3/10, n/60. 

June 10 

Pay invoice of Reynolds, Davis & Co. of June 3, less the discount. 

Fill order received from E. Mason & Co. amounting to $572.07. Terms: 2/10, n/30. 

June 11 

Fill order from Fletcher Bros, for goods amounting to $601. Terms: 3% cash. 

While the terms are cash, payment has not been received. Make no entry in the cash book. 

A. A. Knowles & Co. return merchandise billed to them on the 7th and ask to be allowed 
credit at the billed price, $43.60. 

This is a return of goods previously sold, hence the amount should be deducted from sales. 

B. P. 52. — Debit Sales with the sale price of goods returned by customers (unless Returned Sales 
account is kept). 

B. P. 53. — Credit a Person with allowances made by the business for returned sales, damaged 
goods, adjusted claims, etc. 

Make a journal entry debiting Sales and crediting A. A. Knowles & Co. 

June 12 

Received check from Fletcher Bros, in payment of invoice of June 11, less 3%. 

Pay bill of the City Carting Company for freight and cartage to date, $86.20. (B. P. 11.) 

Fill order from F. H. Randall & Co. for goods amounting to $597.28. Terms: On account. 
Check of $500 received with order to apply on account. 

June 13 

Receive invoice of Reynolds, Davis & Co. for $1027. Terms: 2/10, n/4 mos. 

The acceptance in favor of West, Stone & Co., dated June 3, is due to-day. It was made 
payable at the bank and has been charged to your account as per notice received from the bank. 

This transaction illustrates a common practice. If you make a note payable at your bank, 
on the day the note matures, it is equivalent to an order on the bank to pay the sum named, 
and the holder has only to present it at the bank for payment as he would present a check. 
The accounts affected are the same as though you had written your check in payment of the 
note. Make the cash book entry. Complete the record in the Notes Payable book. 

June 14 

Fill order of Rice & Pond, for goods amounting to $854.15. Terms: On account. 

Receive note at 4 months, dated June 12, from Rice & Pond to apply on account, bearing 
interest at 6%. Face of note, $1000. Make the journal entry, and record in the Notes Receiv¬ 
able book. 

Fill order of Thomas Varick & Co., Georgetown, for goods amounting to $563.06. Terms: 
1%, 30-day acceptance. Make no entry for the draft until notified of its acceptance. 


118 


ELEMENTARY COURSE 


June 15 

Receive from Smith, Perkins & Co. invoice amounting to $841.80. Terms: 3/10, note at 
30 days, with interest. In consideration of your giving the firm an interest-bearing note, a dis¬ 
count of 3% is allowed. The note is issued for the net amount of the invoice. Make the entry 
in the purchases journal for the full amount of the invoice. The note will be for $841.80, less 
3%. Make the journal entry. Three accounts are affected: Smith, Perkins & Co., Discounts 
on Purchases, and Notes Payable. Record in Notes Payable book. 

Receive acceptance from Thomas Yarick & Co., covering your invoice of June 14, less 1%. 
The entry is similar to those for the first two transactions on June 6. Record in Notes Receiv¬ 
able book. 

Sell to Thomas Bowen & Co., 114 Central St., Dover, Ohio, an invoice of goods amount¬ 
ing to $362.50. Terms: 2/10, n/30. 

Pay roll to date as follows: 

Office wages, $75; store wages, $150. 

June 17 

Fill order of D. W. Perry & Co., Madison, Ohio, for merchandise amounting to $52.50. 
Terms: 2/10, n/30. 

Fill order of Thomas W. Bowen & Co. for merchandise amounting to $575. Terms: 2/10, 
n/30. Freight amounting to $5.60, prepaid. 

Freight may be prepaid by the seller as a term of the sale, in which case it is a selling ex¬ 
pense; or it may be prepaid by the seller for the convenience of the buyer but charged to the 
buyer’s account, in which case the buyer re-pays the seller. In this case it is a term of the sale. 

B. P. 54. — Debit Selling Expenses with freight prepaid on Sales, unless a separate Freight- 
Out account is kept. 

Receive an invoice from George C. Buell & Co., 19 Chambers St., New York, for goods 
amounting to $1210. Terms: 1/30, n/60. The invoice is dated June 15. 

Receive check from E. Mason & Co. in payment of your invoice of June 10, less discount. 

June 18 

Send Shields Bros, a check in settlement of their account. 

Pay invoice of the City Mills Co. of June 8, less discount. 

June 19 

Fill order from D. W. Perry & Co. for merchandise amounting to $614.46. Terms: 2/10, 
n/30. 

Goods showing a cost of $32.60 included in the purchases from George C. Buell & Co. on 
June 17 were returned for credit, and a credit memorandum for that amount is received from 
them. 

This transaction reduces your purchases, as well as your debt to George C. Buell & Co. 

B. P. 55. — Debit a person with allowances made to the business far returned purchases, damaged 
goods, adjusted claims, etc. 

B. P. 56. — Credit Purchases with goods returned by the business to the seller (unless a 
Returned Purchases account is kept). 

If the volume of returned purchases is large, or the transactions frequent, an account is 
opened with Returned Purchases. 

Make the entry in the journal, debiting George C. Buell & Co. 

Fill order from F< H*. Randall & Co. for goods amounting to $629.50. Terms: 2/10, n/30. 


JUNE 


119 


Receive check from F. H. Randall & Co. for $600 to apply on account, with the request 
that we allow them our usual discount on as much of the bill as this check will pay. 

This transaction is similar to No. 55 for May. Divide $600 by 98% to find the amount to 
credit to F. H. Randall’s account. 

June 20 

Receive an invoice of goods from Shields Bros, amounting to $686.25. Terms: 1/30, n/60. 

June 21 

Pay bill of City Carting Company, $76.27, for Freight and Cartage bill to date. 

Receive invoice of merchandise from Westen Tea & Spice Co. amounting to $1990.60. 
Terms: 30-day acceptance for $800, remainder on account, 4 months. 

Make entry in purchases journal only. 


June 22 

Accept Westen Tea & Spice Co.’s draft for $800, to apply on account of invoice of June 21. 
Make the entry in the journal for the acceptance (Notes Payable). Record in Notes Pay¬ 
able book. 

Receive invoice of merchandise from West, Stone & Co. amounting to $1130. Terms: 2/10. 
Pay Reynolds, Davis & Co.’s invoice of June 13, less discount. 

Receive invoice of merchandise from Smith, Perkins & Co. for $3049.36. Terms: cash, 
$1000; 30-day note, $1000, balance on account. 

Enter in purchases journal for the amount of the bill, in the cash book for the check, in the 
journal for the note. The balance will be shown when these items are posted to the ledger. 
Record the note in the Notes Payable book. 

/ ■**"’ ' r 

June 24 

Receive check from Thomas W. Bowen & Co. in payment of your invoice of June 15, less 
discount. 

Fill order from Fletcher Bros, for goods amounting to $838.81. Being pressed for cash just 
now, they give us their note, at 30 days, with interest at 6%, with the understanding that we 
allow them our usual discount of 2%. The note has been received. 

Theoretically, an interest-bearing note is worth its face value in cash; practically, it is 
not worth quite its face value, because the bank discount will be a little greater than the inter¬ 
est. If Fletcher Bros, paid cash they would be entitled to the usual discount. Anxious to 
secure the discount, they offer the equivalent of cash in value — an interest-bearing note. 
Make the entry in the sales journal for the amount of the bill, $838.81. Make the entry in the 
journal for the note. Record in Notes Receivable book. 

Three accounts are affected: Notes Receivable, Discounts on Sales, and Fletcher Bros. 
Fletcher Bros, must be credited with the same amount for which they are debited in the sales 

journal. . 

Fill order from Thomas Varick & Co., Georgetown, for goods amounting to $510.04. 

Terms: 2/10, n/30. 

June 25 

Fill order from D. W. Perry & Co. for goods amounting to $434.35. Terms: 2/10, n/30. 
Receive check for $500 from A. W. McKey, to apply on account. 

Sell bill of goods to Thomas W. Bowen & Co., amounting to $2170. Usual terms. 


120 


ELEMENTARY COURSE 


June 26 

On the evening of June 25 the property at 246 Main Street was badly damaged by fire. 
The contents of the safe, including cash, valuable papers, and books of account are found to be 
intact. The furniture and fixtures are a total loss. 

The stock of goods was destroyed or damaged by fire, smoke and water. In order to ascer¬ 
tain the loss suffered on the stock, an inventory of goods which must have been in stock at the 
time is prepared from the original invoices purchased and duplicate invoices sold. This shows 
that the stock on hand at that time, reckoned at invoice cost, amounted to $8920.38. This 
inventory is accepted by the insurance company as a basis for adjustment of the loss. The 
insurance company grants permission to sell the damaged stock to the best advantage. 

B. P. 57. — Debit Fire Loss with the cost of property damaged or destroyed by fire. 

B. P. 58. — Credit Purchases with the cost of goods damaged or destroyed by fire. 

Make the journal entry, with appropriate explanation. 

Fletcher Bros., after an examination of the stock of damaged goods, make an offer of $1500 
for the same, which offer is accepted. This sale should be entered in the journal, as it does not 
represent a sale under normal conditions and at regular selling prices. 

B. P. 59. — Credit Fire LOSS with the amount realized from the sale of damaged goods, or 
other property, or received from insurance in settlement of fire losses. 

Debit Fletcher Bros. 

June 27 

Receive check from A. W. McKey in payment of note of May 28 due to-day with interest. 

Credit Notes Receivable for the face of the note; credit Interest on Notes Receivable with 
the interest. 

Receive check from Fletcher Bros, for $1500 in payment of the special sale of June 26. 

Receive check from Thomas W. Bowen & Co. in payment of your invoice of June 17, less 
discount. 

Receive check from D. W. Perry & Co. in payment of invoice of June 17, less discount. 

June 30 

Receive check from the Equitable Insurance Company for $8000 in full settlement of 
claims for loss by the fire. Of the amount received, $5000 is for insurance on the building and 
$3000 for that on the stock. (B. P. 59.) 

Receive check from D. W. Perry & Co. in payment of invoice of June 19, less discount. 

Make an entry in the journal crediting the personal accounts of Mr. Adams and yourself 
with your monthly salary allowances. Your own salary is charged entirely to General Expenses, 
but as it is estimated that Mr. Adams spends about one-half of his time on the road selling 
goods, half of his salary is charged to Selling Expenses, the other half to General Expenses. 

Pay roll to date as follows: Office wages, $75; store wages, $150. 

Mr. Adams submits a bill for $87.50, traveling expenses for the month of June, which he 
has paid from his own funds, and which he asks to have credited to his personal account. 
(B. P. 40.) 

B.P. 60. — Credit the Proprietor's Personal account with any expenses of the business paid 
from his private funds. 

Pay freight and cartage bills to date, $214.85. 

The following expense bills for the month are paid: Central Telephone Company, $6; 
City Gas & Electric Company, $7.70; Adams & Brown, office supplies, $3.65. 


JUNE 


121 


Adjusting Entries. — At the end of May the interest paid in advance on your note for 
$5000 amounted to $80.83. Since then the business has had the use of the money 30 days, 
which is worth, at 6%, $25. Therefore, the amount of interest prepaid is $25 less than it was 
on the 31st of May. Make an entry to adjust. 

B. P. 61. — Credit Interest Prepaid on Notes Payable, at the end of a business period, 
with the decrease of prepaid interest during the period. 

Debit Interest on Notes Payable. 

If the prepaid interest were greater at the end of the month than at the beginning, the 
entry necessary to adjust would be just opposite to the above. 

At the end of May the Insurance Prepaid amounted to $183.33. When the settlement 
was effected with the insurance company, the policies became void, so that there is no Insur¬ 
ance Prepaid, and an entry must be made to adjust this account. 

Determine what part of $183.33 applied to insurance on real estate, and what part to in¬ 
surance on stock. Then make a journal entry debiting real estate expenses (B. P. 38) and sell¬ 
ing expenses (B. P. 40) with their proper share, and crediting Insurance Prepaid with $183.33. 
This entry, when posted, will balance the Insurance Prepaid account. 

The furniture and fixtures represent a total loss and should be closed into Fire Loss. 

B. P. 62. — Credit Furniture And Fixtures, at cost price, with equipment sold, destroyed, 
or otherwise disposed of. 

If the depreciation has been kept in the Furniture and Fixtures account, then the credit 
must be for the book value, rather than for the cost. 

Debit Fire Loss and credit Furniture and Fixtures for $207.90. 

The cost of the real estate, land and building, was $12032. The land has an estimated 
value of $6000. The difference is the loss due to the fire. 

B. P. 63. — Credit Real Estate , at cost price, with real estate sold destroyed, or otherwise 
disposed of. 


CLOSING THE BOOKS 

The books of original entry should now be closed. If the posting has been kept up to date, 
the only postings which remain are the footings of the purchases journal, sales journal, certain 
items of the cash book, and the adjusting entries. In determining the cash receipts for the 
month, the balance at the beginning of the month must be deducted, since that amount is al¬ 
ready in the ledger. (See illustration Model Cash Book, page 81.) 

Check the posting carefully. 

Take a trial balance. When the trial balance has been approved, copy it, following the 
post trial balance for May. 


122 


ELEMENTARY COURSE 


Prepare a statement showing detail of the fire loss, following the model given. 


Cost of goods destroyed by fire 
Less: 

Insurance received on goods 
Sale of damaged goods 

Net loss on merchandise 
Furniture and fixtures, total loss 
Real estate cost 
Less: 

Estimated value of land 
Insurance received 


S. 




$. 


$. 


*. 


Net loss on real estate 

Total fire loss $. 


On the Profit and Loss statement the item of Fire Loss will appear as a total, and the Fire 
Loss statement is necessary to provide sufficient detail. 

Prepare a Profit and Loss statement. The model given below may be used as a guide. 
Model Form of Profit and Loss Statement for June. 


H. F. ADAMS & CO. 

Profit and Loss Statement, May 31 -June 30, 19— 

Gross sales to June 25 * 

Less: 

Returned sales 


Net sales to June 25 
Deduct cost of goods sold: 

Inventory June 1 $. 

Gross purchases $. 

Less: 

Returned purchases $. 

Cost of goods destroyed by fire . . . 

Freight and Cartage $_ 

Gross profit on sales 
Deduct operating expenses: 

General expenses ___ 

Selling expenses . 

Real estate expenses . 


Net profit on operations 
Add other income: 

Interest on notes receivable $. 

Discount on notes payable 
Discounts on purchases 


Total profit 
Deduct other expenses: 

Interest on notes payable $. 

Discount on notes receivable 
Discounts on sales 


Net profit exclusive of fire loss 
Deduct fire loss 


S. 


s. 




Net loss for month 

H. F. Adams, one-half 
Student, one-half 


Distribution 



























































JUNE 


123 


When the Fire Loss statement and the Profit and Loss statement have been approved, 
copy them in Blank No. 3, following the Trial Balance. 

Prepare a Balance Sheet. There will be one additional asset, Good Will. There is no 
merchandise inventory. 

The closing of the Balance Sheet will be different from former closings. The business has 
suffered a loss which is to be borne equally by the two partners. Instead of adding net profit, 
net loss must be subtracted. The following model may be used as a guide in closing the Bal¬ 
ance Sheet. 


Net Worth, H. F. Adams & Co.: $_ 

H. F. Adams 

Net Worth, June 1 9 . 

Add: 

Personal Account, Credit _ 


Deduct: 

One-half Net Loss 


Net Worth, June 30 

Student: 

Net Worth, June 1 S. 

Add: 

Personal Account, Credit 


Deduct 

One-half Net Loss 


Net Worth, June 30 $. 



CLOSING ENTRIES 

1 The inventory account shows the cost of goods on hand, May 31. It should be added to 
Purchases to show total cost of goods in stock during the month. 

B. p. 64. — Credit Inventory, at closing, with the inventory , if any, at the beginning of 
the period. (.Debit Purchases .) 

2 Close Freight and Cartage into Purchases. 

3 Close Purchases into Sales. 

4 Close Sales into Profit and Loss. 

5 Close the expense accounts into Profit and Loss. 

6 Close Interest on Notes Receivable, Discounts on Purchases, and Discount on Notes 
Payable into Profit and Loss. 

B. P. 65. — Debit Discount on Notes Payable, at closing, with the profit shown by that 
account. 

7 Close Interest on Notes Payable, Discount on Notes Receivable, and Discount on Sales 
into Profit and Loss. 

B p 66 __ Credit Discount on Notes Receivable, at closing, with the loss shown by that 
account. 

8 Close Fire Loss into Profit and Loss. 

B P' 67 # _ Credit Fire Loss, at closing, with the loss shown by that account. 

9 Close Profit and Loss into the Proprietors’ Personal accounts, each one-half. 




















124 


ELEMENTARY COURSE 


B. P. 68. — Debit the Proprietor's Personal account, at closing, with the net loss; or, if there 
are two or more proprietors, debit each with his share. 

B. P. 69. — Credit Profit and Loss, at closing, with the net loss. 

10 Transfer the balances of the Proprietors’ Personal accounts to their capital accounts. 

11 Post the closing entries and close the ledger. Rule the Proprietors’ Personal accounts, 
and balance the capital accounts and the cash account. 

12 Balance Notes Receivable, Notes Payable, and all personal accounts. Any account 
may be balanced by writing on the smaller side the difference between the two sides. The bal¬ 
ancing entry is preferably made in led ink, since that distinguishes such entry from posted 
entries. Care must be used to bring the balance down below the ruling. If the personal ac¬ 
counts are balanced monthly, it will facilitate the preparing of statements to customers (See 
illustration.) 



13 Take a proof trial balance. 

14 When the proof trial balance has been approved, copy it, following the Balance Sheet 
for June. 

15 Examine your books carefully. When you are satisfied that everything is in proper 
form, hand in your books for inspection. 


REVIEW QUESTIONS 

1 What is a draft? What is the distinction between a draft and an acceptance? 

2 Name and define the parties to a draft. 

3 What is the relation between the drawer of a draft and the drawee? 

4 How does a draft differ from a promissory note? 

5 How does an acceptance differ from a promissory note? 

6 What is a Trade Acceptance? 

7 How are sight drafts treated? 

$ What does “ accepted” mean as the word is used in regard to drafts? 

9 What is the advantage of a New York Draft: 

10 What is the basis for determining the value of G'.od Will? 

11 What is the function of Fire Loss account? 

12 What does the balance of Discounts on INotes Payable show? 

























SPECIAL PRINCIPLES 


125 


13 Explain the distinction between cash discounts and trade discounts. 

14 What is meant by the term of discount, either on notes or bills? 

15 What entry is made for goods returned to the seller, for goods returned to the buyer? 

16 How is freight prepaid treated? 

17 When the proceeds of a bill and the rate of discount are given, how is the face of the 
bill found? 

18 How is loss by fire handled on the books? 

19 When goods are destroyed by fire, how is the loss on such goods ascertained? 

20 What is the advantage of daily posting? 

SPECIAL PRINCIPLES OF ACCOUNTING PROCEDURE 

Changes are constantly being made in the science and art of Bookkeeping and Account¬ 
ing. It is not like a dead language, the forms of which do not change. It is certain under such 
conditions that at any time in the development of a subject there will be some confusion of 
names. Some authors use a name with one meaning; some use the same name with another 
meaning, and by the time it is agreed exactly what meaning shall be placed upon those terms, 
new terms will have arisen. 

The profit and loss statement is also called the loss and gain statement, or the business 
statement. The balance sheet is called the financial statement, or the statement of resources 
and liabilities, with assets and resources used synonymously. The wider the range of the stu¬ 
dent’s knowledge of the use of terms, the more intelligent will be his advanced study. 

The student has been taught rules governing entries in the various accounts so far used. 
Continued practice makes the application of these rules largely a matter of habit. In all com¬ 
mon transactions the debits and credits are determined without effort. Back of these special 
rules is one inclusive principle which applies to all entries. 

The student has observed that cash and notes are debited when they are received. They 
are tangible things, capable of being handled. Always in transactions involving cash or notes 
there is something received and something given. 

In every transaction involving the purchase of property, whether real or personal, there is 
something tangible received by one party and given by the other. 

In every transaction with persons there is one who receives and another who gives. (In 
some sense both parties give and receive, but in the case of some transactions this relation is 
not very clear to the beginner.) 

In transactions with incomes there is always the element of profit, and profit always ap¬ 
pears on the credit side of the ledger, as when cash is received in payment of interest on notes 
receivable. 

Where services are rendered to another for pay, there is the element of profit, as when one 
sells goods on commission and receives cash therefor. 

In expense transactions there is always the element of loss, and losses appear on the debit 
side of the ledger. In transactions involving allowances, as discounts on sales and discounts 
on purchases, there is always the profit or loss element — a profit if the allowance is in favor 
of the business, a loss if the allowance is made by the business. 

Hence, a general rule may be stated which covers all business transactions. With regard 
to tangible things, debit the thing received; credit the thing given: with regard to persons, 
both debtors and creditors, debit the receiver; credit the giver: with regard to incomes, prof¬ 
its, services, allowances and expenses, debit for losses, allowances made to others, services 
hired by the business; credit for income, profits, services rendered to others for hire. 


126 


ELEMENTARY COURSE 


In double entry Bookkeeping an account may be opened with anything. The bookkeeper 
will open at the beginning of the business such accounts as he knows he will use, and as the 
business progresses he will open such other accounts as may be necessary to give the desired 
detail. 

Accounts are sometimes classed as personal and impersonal. Where this classification is 
used, personal accounts are those with debtors, creditors, and the proprietors (except in corpo¬ 
rations). Impersonal accounts embrace all other accounts. The impersonal accounts are sub¬ 
divided into nominal accounts and real accounts. Real accounts include assets and liabilities. 
Nominal accounts correspond to the profit and loss accounts. 

There are different methods of handling various accounts, particularly profit and loss ac¬ 
counts, accrual accounts, and prepayment accounts. While many of the modifications are 
legitimate, yet care should be taken with regard to the result. If two experienced bookkeepers 
were given the same set of transactions to write up, doubtless they would use different methods 
as to detail, but their results, if correct, would be alike. Obviously, there cannot be two differ¬ 
ent sets of results for the same series of transactions. 

For instance, in handling the insurance account, one might debit Selling Expenses for the 
cost of insurance on stock when the policy was taken out. The other might debit Insurance 
Prepaid instead. But at closing each bookkeeper must make such adjustments of his accounts 
as will show the actual expense of insurance for the current period, and the cost of Insurance 
Prepaid at the end of the period. 

The first bookkeeper would make an entry debiting Insurance Prepaid and crediting Sell¬ 
ing Expenses for the prepaid insurance. The second bookkeeper would make an entry debiting 
Selling Expenses and crediting Insurance Prepaid. The balances shown in the two accounts of 
both bookkeepers would be the same. Suppose the policy cost $100 for a year and the books 
are closed four months after the policy was taken out. The first bookkeeper’s accounts at clos¬ 
ing would stand thus: 

Selling Expenses 

Sept. 1 100. Dec. 31 66.67 

Insurance Prepaid 
Dec. 31 66.67 

The second bookkeeper’s accounts at closing would stand thus: 

Selling Expenses 
Dec. 31 33.33 

Insurance Prepaid 

Sept. 1 100. Dec. 31 33.33 


MIXED ACCOUNTS 

The accounts which the student has kept thus far have uniformly shown one result — 
asset, liability, proprietary interest, profit, or loss. This is as it should be. But accounts are 
sometimes kept in such a manner that they may show at one time an asset, at another time a 
liability; at one time a profit, at another time a loss. 

For instance, if the old mixed account is kept for merchandise, inventory, purchases, and 
sales all in one account, it will be closed into profit and loss, showing either a profit or a loss. 


SPECIAL PRINCIPLES 


127 


After closing, the inventory will be brought down under the ruling, whereupon the account will 
show an asset. 

Discounts on sales and discounts on purchases may be kept under one title, Merchandise 
Discount. If so, the account so kept will show either a profit or a loss, depending upon whether 
the sales discounts or the purchase discounts are in excess. 

The interest and discount items may be kept under the title InteresJ and Discount. At 
closing, this account will show a profit or a loss. If interest has accrued on Notes Receivable 
or on Notes Payable, the account will show an asset or a liability after closing, but no one can 
tell which until closing time. 

Such mixed accounts are to be condemned as unscientific in method and confusing in re¬ 
sults. 

INSOLVENCY 

The sets worked out by the student have left the proprietor or proprietors with a net 
worth. If, however, the liabilities exceed the assets, the result is net insolvency. 

CLASSIFICATION OF ASSETS AND LIABILITIES 

Assets and liabilities are classified with reference to their availability for immediate use in 
the business. 

The first class, known as liquid assets, or current assets, consists of cash, notes receivable, 
and accounts receivable. 

The second class, known as deferred assets, consists of such items as insurance prepaid, 
interest prepaid, rent prepaid, etc. The use of such assets is deferred or put off until some 
future time. 

The third class, known as fixed assets, or permanent assets, includes such items as real es¬ 
tate used for business purposes, long term notes, bonds, etc. 

A fourth class is sometimes specified as trade assets, consisting of goods ready for sale. 

Liabilities are also classed in three groups, corresponding to the three groups of assets. 
Current liabilities are those which are maturing from day to day, accounts payable and notes 
payable. ' * • 

Deferred liabilities are those which are accruing from day to day but which are not yet 
due, such as interest accrued on notes payable and wages accrued. 

Permanent or fixed liabilities are those which will not become due for a long time, such as 
bonds and mortgages payable. 

Assets and liabilities should be arranged on the Balance Sheet in the order of their classifi¬ 
cation. 

TAKING CHARGE OF A SET OF BOOKS 

If the bookkeeper has charge of the opening of a set of books, he should take care to see 
that all the assets and liabilities are entered, opening the ledger accounts in the proper sequence 
of assets, liabilities, capital, and profit and loss accounts. All amounts should be carefully veri¬ 
fied. The accuracy of a statement for which the bookkeeper may later be held responsible 
should never be taken for granted. He should make certain that the cash entered is actually 
on hand; that the notes and other papers are as they are represented to be before entering 
them on the books. 

All that is necessary to open a set of books after the assets and liabilities are known, is to 
get the assets on the debit side and the liabilities and investment on the credit side of the 


128 


ELEMENTARY COURSE 


ledger. Unless the investment is composed entirely of cash the opening entry should be made 
in the journal. To make certain that the ledger is in balance a trial balance should be taken 
after the opening entry is posted. 

If an asset has been omitted from the entry and is discovered later, an entry should be 
made to bring it on to the books by debiting the asset account and crediting the proprietor’s 
capital account. If a liability has been omitted, the proceeding is, of course, just the reverse. 

On taking charge of a set of books which have been kept by another bookkeeper, one must 
De no less careful. If the change is made at the end of a fiscal period, the incoming bookkeeper 
should call for and examine the statements and schedules of accounts receivable and accounts 
payable, notes, etc., verifying them by reference to the ledger and to any other records avail¬ 
able. The cash account should be verified. The balance of cash in bank cannot be verified 
except with the aid of the bank statement from which, with the check book and the record of 
checks not yet cashed, a reconciliation can be made. The proof trial balance should be exam¬ 
ined, and, after footings have been proved, carefully checked against the ledger accounts to 
make sure that all accounts are entered, that the ledger balances agree with the trial balance 
figures, and that all accounts on the trial balance are actually in the ledger. 

If the change is made during a fiscal period, see that the ledger was in balance at the close 
of the last fiscal period, that cash proves and that the records are in good condition for continu¬ 
ing the work. It may often be necessary to post the work to date and take a trial balance. 
Where special books and columns are used, and it is desired to have postings show monthly 
totals, the balance may be proved without posting totals. If all the individual items are posted 
and all the books pencil footed, a trial balance may be taken by using the balances in the 
ledger and adding to the total all the pencil footings which would appear on the debit side and 
credit side respectively if they were posted. 

If a mistake is found, it should be reported to the proprietor or person in charge. If the 
bookkeeper assumes the correctness of work, unless it is properly vouched for, he also assumes 
the burden of responsibility for the mistakes he has made no effort to find, or, having found, 
neglects to report. 


CASH SHORT AND OVER 

Sometimes it is impossible to prove cash. An item of cash may be received and deposited 
without having been entered in the cash book, in which case cash will not prove. It is not 
always possible to locate such an error. Even if a copy of the deposit slip is kept, while it may 
be seen that the discrepancy in the cash proof is the same as the amount of currency deposits 
over the entries for cash, it may not be possible to tell from what source the item was received. 
If only checks are received, or if the error consists in not having entered a check, and a suffi¬ 
cient copy of the deposit slip is kept, it is not difficult to locate such an error. 

The same sort of error may happen in cash payments, where currency is used. When the 
error cannot be found, it is charged or credited to Cash Short and Over, or an account with 
similar significance. If the error is discovered later, an entry is made to correct the record. If 
the error is not found before closing, the question of disposing of it arises. If there is a reason¬ 
able probability that it may be discovered, the balance may be treated as an asset or a liability, 
depending upon whether it is a credit balance or a debit balance. If there is no such probabil¬ 
ity, or if the error is old, it should be treated as a profit or loss. 

The accurate handling of cash is greatly facilitated if all funds received are deposited in 
the bank and all payments are made by check. 

' 


SPECIAL PRINCIPLES 


129 


PROTESTING COMMERCIAL PAPER 

When a check is not paid upon presentation, or a note is not paid if properly presented at 
maturity, or a draft is not accepted upon presentation, the paper is said to be dishonored. 
Commercial paper, when dishonored, may be protested. A protest is a formal statement made 
by a notary public to the effect that a negotiable instrument has been dishonored. 

A fee is charged for making the protest. If a check or note for which the drawer has been 
credited is protested, the maker should be charged both for the check or note and the protest 
fee. 


ERRORS AND CORRECTIONS 

Erasures should not be made in books because it invalidates them as documentary evi¬ 
dence. Before an entry has been posted, the wrong amount may be canceled, as already noted, 
and the correct amount written in. After an entry has been posted, it should never be changed 
in any way. If an error is discovered, an entry should be made to cancel the wrong entry, and 
the correct entry made, or an entry should be made to adjust the error, and all entries posted. 
There is no more prolific source of trial balance errors than tampering with posted entries, to 
say nothing of the other bad effects. Erasures, blots, finger marks, and lack of neatness gener¬ 
ally are unpardonable in the bookkeeper. 


THE BOOKKEEPER’S CONFIDENTIAL RELATION 

The bookkeeper holds a confidential position. He cannot betray it without betraying his 
own interests. The private records of the business, known to the bookkeeper, may not be dis¬ 
cussed by him with outsiders, or even with other employees of the business if he is to retain 
the confidence of his employers and his own self-respect. 


INVENTORIES IN EXPENSE ACCOUNTS 

It is still a practice to some extent to use inventories in expense accounts instead of mak¬ 
ing adjusting entries. For instance, at closing there may be office supplies on hand amounting 
to $50 and insurance prepa : d amounting to $75. These are assets regardless of the method of 
keeping the accounts, and they must be shown as assets. The proper method would be to 
debit Office Supplies on Hand and Insurance Prepaid for the respective amounts; but if they 
are treated as expense inventories, when the account is closed they are entered on the credit 
side of the expense account (reducing the loss shown by so much), and after the account is 
closed the amount, $125, is brought down on the debit side. The result is an asset in a loss 
account. It is not good bookkeeping. 


ACCOUNT BOOKS 

Books of Account are divided into two classes: Principal books and Auxiliary, or helping 
books. 

Principal Books. — A principal book is one from which or to which posting is done. In 
this class are the journal, cash book, sales journal, purchases journal, and ledger. 


130 


ELEMENTARY COURSE 


Auxiliary Books. — An Auxiliary book is one which helps to complete the record by sup¬ 
plying certain details, but in which no debits and credits are recorded, and from which, conse¬ 
quently, no posting is done. In this class are the check book and the note books. Other exam¬ 
ples are the stock book, in which is kept a detailed record of the merchandise on hand; and 
the time book, which records the number of hours’ labor done by each employee. 

Index Book. — For convenience in referring to accounts in the ledger, it is necessary to 
have the names of all accounts arranged in alphabetical order in a book especially arranged 
for that purpose, with the page number of the ledger page on which the account appears written 
immediately after the name of the account. This index book may be bound in the fore part of 
the ledger, or it may be a separate book. 

r* Before beginning to post, the bookkeeper may find out from the index book the ledger 
page number of each account appearing in the cash book, sales journal, purchases journal, and 
journal, and insert it in the folio column before the name of the account. This enables one in 
posting to refer directly to the page of the ledger on which the account appears, without loss of 
time. As each entry is posted, a check mark is placed by the folio in the book posted from. 


SYSTEMATIZING THE WORK 

Posting. — Systematic posting will do much to minimize the errors which are likely to occur 
in the process of transferring entries from the books of original entry to the ledger, especially 
if the bookkeeper observes the sequential relation of the entries being posted to the entries already 
posted. 

Transactions with customers begin as sales, hence the first record of such transactions will 
appear as a charge in the sales record. If the sales record is posted first, then the bookkeeper 
has a check on the accuracy of his posting by observing whether or not the credit entries are 
consistent with the debit entries. For instance, after a sum is posted to the credit side of a 
customer’s account, it should be compared with the debit item which it is supposed to cancel, or 
partly cancel. If the two amounts are nearly the same, as $315 on the debit side and $308.70 
on the credit side, it will usually indicate a mistake such as posting the proceeds of an invoice, 
paid less discount, instead of the face; or, if the credit is larger than the debit, it may indicate that 
the amount has been posted to the wrong account, or that the figures have been transposed, since 
it is unusual for customers’ accounts to show a credit balance. 

The same check may be observed in posting to creditors’ accounts if the entries in the pur¬ 
chases record are posted first; that is, before the debits to those accounts from the journal and 
the cash book are posted. 

If the same item appears twice on the credit side of a customer’s account and only once on 
the debit side, it will usually indicate that an error has been made in crediting a person when 
notes receivable should have been credited. Similarly, if the same item appears twice on the 
debit side of a creditor’s account, it is likely that an error has been made in debiting a person 
when notes payable should have been debited. 

In the notes receivable account — when notes are posted separately — a credit entry for a 
note paid in full must always be preceded by a debit entry for the same amount. If there is a 
slight difference between the corresponding amounts, it may mean that a note has been credited 
for proceeds rather than for the face, at least an error of some kind to be investigated and cor¬ 
rected. In the notes payable account, a debit entry for a note paid in full must always be pre¬ 
ceded by a credit entry for the same amount. A slight difference between the sums will probably 
mean that a note has been debited for the proceeds instead of the face. 


SPECIAL PRINCIPLES 


131 


By exercising care and taking advantage of all possible checks on accuracy, much difficulty 
will be avoided in getting a trial balance. 

Arrangement of Ledger Accounts. — System in the arrangement of ledger accounts tends 
to accuracy. Accounts of the same class should be grouped together — assets, liabilities, trading 
accounts, profits, and losses. When such arrangement is followed, a careful inspection of the 
trial balance which does not balance will often reveal the difficulty. If any account shows an 
unusual condition, if it is unusually large or small, or seems to be on the wrong side, it should be 
investigated. The observant bookkeeper acquires a sort of sixth sense with regard to his accounts. 

The Statements. — Either of the two principal statements, the profit and loss statement, 
and the balance sheet, may be made first. They must always agree in their findings. Every 
debit balance which appears on the trial balance is used as a debit either on the profit and loss 
statement or on the balance sheet, and every credit balance on the trial balance is used as a credit 
either on the profit and loss statement or on the balance sheet. Every non-ledger inventory is 
used on one statement as a debit and on the other statement as a credit. When this is done, it is 
mathematically certain that the statements agree. If they do not, the statements must be 
checked against the trial balance to see that the above conditions are true for those particular 
statements. If the statements still do not agree, then there was no trial balance in the first place. 

Copying. — Very frequently the bookkeeping student makes rough drafts of trial balances 
and other statements, and when they are found to be correct, he copies it, makes a mistake in 
copying, and is unable to make the remaining statements agree. A group of figures should 
always be checked after copying, and all additions and subtractions verified. 


132 


ELEMENTARY COURSE 


WHOLESALE CARPET BUSINESS 

Write up the following transactions, using loose journal and ledger paper. The books to 
be used are cash book, sales journal, purchases journal, journal, stock book, and ledger. Use 
three-column journal paper for the cash book, heading the columns Accounts Receivable, Dis¬ 
counts on Sales, and Net Receipts on the receipts side; Accounts Payable, Discounts on Pur¬ 
chases, and Net Payments on the payments side. 

The Stock Book. — The only thing new in this exercise is the stock book. The form of 
stock book, or perpetual inventory, illustrated below, is designed to show the quantity of goods 
on hand from day to day. As goods are purchased, the number of yards is entered in the Bot. 
•column and added to the number in the On Hand column. The number of yards sold is en¬ 
tered in the Sold column and deducted from the On Hand column. Thus the last number in 
the On Hand column will always show the quantity of goods in stock. The form below shows 
part of the stock book for the following transactions. 


Form of Stock Book 



Axminster 

Body Brussels 

Ingrain 

Lining 


Bot. 

Sold 

On Hand 

Bot. 

Sold 

On Hand 

Bot. 

Sold 

On Hand 

Bot. 

Sold 

On Hand 

June 

2 




750 


750 

1200 


12,00 

2500 


2500 


4 





150 

600 





300 

2200 


4 








200 

1000 


600 

1600 


4 





450 

150 





850 

750 


5 





150 









5 




892 


892 




2200 


2950 


6 

400 


400 







2000 


4950 


7 


145 

255 











8 





392 

500 


400 

600 


1200 

3750 


An inspection of the form will show that each purchase or sale, whether composed of one 
or many items, occupies one line. The date of the transaction is given in each case. 

A stock record of this kind does not obviate the necessity of taking an inventory. An in¬ 
ventory of goods on hand should be taken periodically and the result compared with the stock 
book. 

The stock record may be kept on a card index system. By this method a card is used for 
each item of merchandise, the name of the article being written at the top of the card. Under¬ 
neath this, in special ruled columns, is kept a record of goods bought, sold, and on hand. There 
is also a column for the date or order number. The cards are filed alphabetically according to 
the name of the article. 

Rule in red ink on foolscap paper a stock book similar to the form shown. Enter in your 
stock book the quantities bought, sold, and on hand from day to day. ' 

Your teacher will assign you a selling price list from the Cost and Selling Price Lists below. 
The buying prices are shown at the left of the list. 

























WHOLESALE CARPET BUSINESS 


133 


Cost and Selling Price Lists 


Cost 


1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

1.87 2 

Axminster ....... 

2.25 

2.27 

2.26 

2.24 

2.25 

2.28 

2.27 

2.25 

2.30 

2.24 

1.05 

Body Brussels. 

1.50 

1.48 

1.49 

1.52 

1.50 

1.48 

1.50 

1.53 

1.48 

1.50 

.62 2 

Ingrain. 

.87 2 

.87 2 

•87 2 

.87 2 

.87 

.87 2 

.86 

.87 2 

.88 

.87 2 

.06 1 

Lining. 

.09 

.08 

.10 

.08 2 

.09 2 

.09 

.10 2 

.09 

.09 2 

.09 

.67 2 

Linoleum. 

.75 

.76 

.74 

.77 

.75 

.73 

.75 

.74 

.73 

.76 

.33^ 

Matting. 

.50 

.52 

.51 

.48 

.49 

.50 

.52 

.50 

.51 

.49 

1.12 2 

Moquette. 

1.62 2 

1.62 2 

1.66f 

1.62 2 

1.66f 

1.67 2 

1.62 2 

1.66| 

1.62 2 

1.67 2 

.331 

Oilcloth. 

.45 

.43 

.44 

.42 

.45 

.43 

.44 

.45 

.46 

.42 

.66| 

Tapestry Brussels. 

.87 2 

•87 2 

.87 2 

.87 

.87 2 

.87 2 

.87 2 

.87 2 

.87 2 

.87 3 

1.37 2 

Velvet. 

1.67 2 

1.67 2 

1.661 

1.62 2 

1.67 2 

1-661 

1.62 2 

1.67 2 

1 62 2 

1.67 2 


TRANSACTIONS 

June 1 Commenced the Wholesale Carpet business, at No. 182 Elm Street, investing cash, 
$5500. 

1 Paid $250 for office furniture. 

2 Bought of John H. Pray & Co., Boston, 2/10, n/30, 600 yd. moquette, 750 yd. body 
Brussels, 1200 yd. ingrain, 1200 yd. matting, 2500 yd. lining. 

3 Bought of Barton Bros., Philadelphia, 1220 yd. linoleum, 1429 yd. oilcloth, giving your 
note at 15 days, with interest, in payment. 

4 Sold E. B. Ailing & Co., for cash, less 3%, 125 yd. moquette, 150 yd. body Brussels, 300 
yd. lining. You may number the sales beginning with No. 100. Enter all sales in the sales 
journal for the full amount. Calculate the discount for the cash book entry. 

4 Sold F. H. Walling & Co., 2/10, n/30, 200 yd. ingrain, 400 yd. matting, 600 yd. lining. 

4 Sold J. G. Carter & Co., 400 yd. moquette, 450 yd. body Brussels, 850 yd. lining, taking 
their note at four months, in payment. 

Enter in sales journal and journal. 

5 Sold E. H. Smith & Co., 75 yd. moquette, 150 yd. body Brussels, 600 yd. linoleum, 429 
yd. oilcloth, receiving their 30-day acceptance in payment. 

5 Discounted J. G. Carter & Co.’s note of June 4 at the City Bank. 

Find the date of maturity of the note. Calculate the discount for the exact number of 
days from June 5 to October 4. Use 6% for all interest calculations in this set. 

Credit Notes Receivable in Net Receipts for the proceeds of the note. Make a journal« 
entry for the discount, debiting Discount on Notes Receivable and crediting Notes Receivable. 
The two credits to Notes Receivable must equal the face of the note. 

5 Bought of John H. Pray & Co., Boston, 2/10, n/30, 950 yd. moquette, 892 yd. body 
Brussels, 2200 yd. lining. 

5 Paid freight and drayage on merchandise, $32.10; rent for month of June, $75; books 
and stationery, $22.50. 

Debit General Expenses for the last two items. 

5 Bought of James Smith & Co., New York, 400 yd. Axminster, 525 yd. velvet, 984 yd. 
tapestry Brussels, 2000 yd. lining, accepting their 10-day draft in payment. 

Do not neglect the stock book record. 


























134 


ELEMENTARY COURSE 


7 Paid James Smith & Co.’s draft of June 5, at 10 days from date, for $2252.88, less 
discount for the unexpired time. 

Debit Notes Payable in Net Payments with the proceeds of the acceptance. Make a jour¬ 
nal entry for the discount, debiting Notes Payable and crediting Discount on Notes Payable. 
The two debits to Notes Payable must equal the face of the acceptance. 

7 Sold Reed & Savage, subject to sight draft, less 3%, 145 yd. Axminster, 220 yd. velvet, 
484 yd. tapestry Brussels. 

8 Drew a sight draft on Reed & Savage for the amount of invoice sold them June 7, less 
3%, and had the draft placed to your credit in the City Bank. 

This draft is deposited for credit and collection. Inasmuch as Reed & Savage bought the 
goods subject to sight draft, there is no doubt that they will pay the draft upon presentation. 
Calculate the discount and make the cash book entry. 

8 Sold Knowles & Johnson on account, 2/10, n/30, 300 yd. moquette, 392 yd. body Brus¬ 
sels, 400 yd. ingrain, 1200 yd. lining. 

9 Paid the invoice of J. H. Pray & Co., received June 2, $2768.75, less 2%. 

10 F. H. Walling & Co. paid your invoice of June 4, less 2%. 

11 Discounted E. H. Smith & Co.’s acceptance of June 5, at the City Bank. (See second 
transaction of June 5.) 

12 Sold F. H. Walling & Co. on their note at 4 mo., with interest, 600 yd. ingrain, 475 
yd. matting, 1200 yd. lining. Allowed them a discount of 3%. Enter in sales journal for the 
full amount of the invoice. Calculate the discount on sales and make the journal entry. 

14 Bought of John & James Dobson, Philadelphia, 2/10, n/30, 892 yd. body Brussels. 
1225 yd. tapestry Brussels. 

14 Bought of Barton Bros., Philadelphia, 8/15, n/4mo., 1500 yd. linoleum, 1400 yd. oilcloth. 

15 Knowles & Johnson sent you, to apply on account, T. H. Sullivan’s note in their favor, 
dated May 24, 19—, at 90 days for $742.28, with interest. Allowed Knowles & Johnson credit 
for the face of the note plus the interest accrued upon it to date. 

In previous transactions, notes have been transferred at their discount value. In this case 
the note is transferred at its actual value — face plus accrued interest. Theoretically the values 
are the same, actually, they differ slightly. If the note were transferred on the basis of the dis¬ 
count value, the interest would be found for the full term of 90 days, and the discount calcu¬ 
lated on the amount for the unexpired time. By this method the interest is found for the ex¬ 
pired time, which is 22 days. 

Debit Notes Receivable and Interest on Notes Receivable and credit Knowles & Johnson 
for the sum. 

15 Paid John H. Pray & Co. invoice of June 5, less 2%. 

16 Discounted the Sullivan note, received of Knowles & Johnson, at the City Bank. (This 
is an interest-bearing note.) 

The note is now regularly discounted. Find the interest for the full 90-day period. Find 
the discount on the amount (face plus interest) for the unexpired time from June 16 to the 
date of maturity. The entry may be made for both the interest and the discount, or it may be 
made for the excess of interest over discount. The latter method is more convenient, since it 
will save a journal entry for the discount. Credit Notes Receivable for the face of the note; 
credit Interest on Notes Receivable for the difference between the interest and the discount 

16 Sold J. G. Carter & Co., on a/c, 2/10, n/60, 600 yd. linoleum, 480 yd. oilcloth. 

17 Drew for private use, $150. 

No personal account for the proprietor is to be opened in this set. Charge to the capital 
account. 


WHOLESALE CARPET BUSINESS 


135 


17 Paid clerks, $75. ) 

Charge salaries to General Expenses. 

18 Sold E. H. Smith & Co., 212 yd. Axminster, 305 yd. velvet, 250 yd. tapestry Brussels, 
obtaining their 30-day acceptance in payment. 

18 Knowles & Johnson paid the balance due on their bill of June 8, less 2% of the entire 

bill. 

Deduct the credit of June 15 from the invoice of June 8 for the amount to be credited 
to Knowles & Johnson. Take 2% of the invoice for the sales discount. The difference 
between the two amounts thus found will be the amount of cash received from Knowles & 
Johnson. 

No discount was allowed Knowles & Johnson at the time they were credited with the note. 
Now that they complete the payment within the discount term, they are entitled to 2% of the 
entire bill. 

18 Paid note (dated June 3) and interest in favor of Barton Bros, due to-day. 

Make a separate entry for the interest. 

21 Sold E. B. Ailing & Co., 2/10, n/30, 420 yd. moquette, 280 yd. body Brussels, 800 yd. 
lining. 

21 Discounted F. H. Walling & Co.'s note of June 12, at bank. 

This is an interest-bearing note. The entry is similar to that for the first transaction on 
June 16. 

22 Bought of John H. Pray & Co., Boston, 3/10, n/30, 897 yd. moquette, 1745 yd. in¬ 
grain, 2400 yd. lining. 

23 Bought of James Smith & Co., New York, subject to sight draft at 10 days, 722 yd. 
Axminster, 941 yd. velvet. 

Make no entry for the sight draft until it is received. 

23 Paid John & James Dobson's invoice of June 14, less discount. 

24 Sold Reed & Savage 400 yd. moquette, 712 yd. body Brussels, 1200 yd. lining, taking 
their 10-day acceptance in payment, less 2% discount. 

25 Bought of John & James Dobson, 1892 yd. body Brussels, 671 yd. moquette, 3200 yd. 
matting. Gave in part payment your note at 4 mo. for one-half of the amount of the invoice; 
the balance on account, 4 mo. 

26 Sold Knowles & Johnson, net 4 mo., 2/15, 920 yd. linoleum, 1220 yd. oilcloth, 43 yd. 
Axminster. 

28 Sold F. H. Walling & Co., 2/10, n/30, 698 yd. moquette, 792 yd. body Brussels, 1500 
yd. lining. 

28 Sold E. B. Ailing & Co., 2/10, n/30, 390 yd. moquette, 822 yd. body Brussels, 975 yd. 
tapestry Brussels. 

29 Paid Barton Bros', invoice of June 14, less 8%. 

30 E. B. Ailing & Co. desire to take advantage of the 2% discount offered on their pur¬ 
chase of June 21, but being short of money, they send $1000 to apply on account, with the 
understanding that they are to be allowed the discount on so much of the bill as this amount 
will pay for. 

$1000 represents 98% of the amount for which E. B. Ailing & Co. are to be credited. 

30 Paid clerks, $75; freight bills to date, $68.92. 

30 Depreciation on Furniture and Fixtures is estimated at 10%. Make an entry to ad¬ 
just, charging the depreciation to General Expenses. In accounting practice reasonable depre¬ 
ciation should be allowed at closing date whether for one month or one year. 

Close the cash book, the purchases journal, and the sales journal. 


136 


ELEMENTARY COURSE 


Open ledger accounts, arranging the accounts in proper order, and giving each account 
one-fourth page. 

Post and take a trial balance. 

From the stock record, determine the inventory of merchandise on hand, and calculate its 
value, using cost prices. 

Prepare a Profit and Loss statement and a Balance Sheet. 

Make journal entries to close, post and rule the ledger accounts, and take a proof trial 
balance. 

Submit the work to the instructor for inspection. 


OPENING ENTRIES 
Exercise 17 

In opening a set of books, first make a complete statement of the assets and liabilities of 
the business. The assets will consist of Cash on hand and in bank; all forms of property in the 
possession of the business, such as merchandise, materials, furniture and fixtures, real estate, 
machinery and tools, etc.; and all debts due the business either on accounts receivable or on 
notes receivable. There should also be included under the assets any other items of indebted¬ 
ness due the business, such as accrued interest on notes receivable, prepaid insurance, etc. 

The liabilities of a business consist of all it owes. This indebtedness may be either on 
accounts payable, or on notes payable. There may also be other items of debt owing by the 
business, such as unpaid rent, accrued interest on notes payable, etc. 

The difference between the sum of the assets and the sum of the liabilities represents the 
net investment, or net capital, of the business. This difference should be added to the list of 
the liabilities of the business, since it is the amount which the business owes to the proprietor 
or partners. 

After this statement of assets and liabilities is completed, it is easily journalized by the 
following rule: 

Debit the assets; credit the liabilities; credit the proprietor or partners for the difference 
between the assets and the liabilities. 

This rule will make a complete journal entry of any opening statement. 

By this method, the opening statement of the assets and liabilities of any business is in¬ 
cluded in one journal entry. 

If desired, however, a separate entry may be made for the assets and another for the lia¬ 
bilities. In this case the rule would be: 

Debit the assets and credit the proprietor for the total; credit the liabilities and debit the 
proprietor for the total. 

The opening entry of a business is placed in the journal (unless the only item is cash), the 
cash being included in the entry as a matter of convenience and to show the complete invest¬ 
ment in one entry. The cash investment is entered also in the cash book, but is checked off so 
that it will not be posted a second time to the credit of the proprietor or partners. In the jour¬ 
nal the cash debit is checked off when the entry is made in the cash book. 

Investment of Single Resource by Single Proprietor 

This is the simplest kind of opening transaction. The form of the entry required has been 
shown in previous work. 


OPENING ENTRIES 


137 


Investment of Several Resources by Single Proprietor 

Make on journal paper the opening entries (journal and cash book) for the following: 

1 Geo. W. Carter begins the Coffee, Tea, and Spice business this day with the following 
assets: Cash on hand and in bank, $385; merchandise as per inventory, $1250; store fixtures, 
$275; Jno. Harper owes on account, $25. 

The entry below illustrates the proper form of journal entry. 



G. T. Berry has this day 

commenced the Tea, Coffee, 





and Spice business at 309 E 
follows: 

1m St., investing assets as 





Cash 

on hand and in bank 

400 




Inventory 

per schedule 

1500 




Store Fixtures 

tt u 

300 




Jno. Harper 

on account 

50 




G. T. Berry 

investmen 



2250 


Do not neglect to check off the cash investment entry in both journal and cash book. 

2 James Wooley begins business with the following assets: Cash in safe, $125; cash 
in bank, $3675; store building and lot, $5000; goods per inventory, $2500; Harry Altenau 
owes, $140; Daniel Jenkins owes, $320; note of Davis Bros, per B. B., $627.50; interest ac¬ 
crued on above note to date, $6.28. 

3 E. M. Harrigan begins business with these assets: Cash in bank, $3750; merchandise 
as per inventory, $5378; office safe, $375; typewriter and other office furniture, $200; building 
and lot partially occupied by business, $7000. The following firms owe Harrigan on account: 
Harrison Loeb, $126; Fay & Eagan Co., $75.84; Jones Bros. Co., $186.75. 

Investment of Assets and Liabilities by Single Proprietor 

4 J. W. Jones has this day opened a Wood and Coal business at 125 W. Fifth St., with 
the following assets and liabilities: 

Assets. — Cash on hand and in bank, $675.50; merchandise as per inventory, $1672.25; 
horses and wagons valued at $570; S. M. Blue on account, $72.50; J. D. Simpson on account, 
$45. 

Liabilities. — Due Jno. Solzer & Co., on account, $395; due H. C. Bailey on 30 da. note, 
$500. 

The following illustrates the form of journal entry required. 



Cash 

on hand and in bank 

700 




Inventory 

per schedule 

1345 




Horse & Wagon 

u <t 

590 




E. H. Beel 

on account 

73 




E. L. Schuler 

U tt 

50 




R. E. Brown & Co. 

it tt 



400 


Notes Payable 

30 da. note 



600 


J. W. Smith 

net investment 



1758 




















138 


ELEMENTARY COURSE 


5 V. C. Taylor commenced business with cash, $5000; real estate, $12,000; merchandise, 
$8500; note for $1500 against J. Wilson, with accrued interest, $10.50; note for $600 against 
A. R. White, with interest accrued, $7.20; due from D. D. Jones on account, $175, and from 
J. C. Henry, $375. Taylor owes on a note to Carl D. Steiner, $460; interest accrued on this 
note, $9; Taylor owes on account to Brown & Jones, $1265.50, and to Jacob J. Anstead, $324.75. 


Opening Entries of Partnerships 

6 Harry Peck and Joseph Long form a partnership under the firm name of Peck & Co., 
for the purpose of conducting the Furniture business. Peck invests cash $5000, and Long in¬ 
vests $3000. 

Make the entry, debiting cash for the total amount of money invested, this being the asset 
at beginning, and crediting the partners for their respective investments. 

7 John Shaler, Henry Desmond, and J. C. Cunningham have formed a partnership under 
the style of Shaler, Desmond & Co., to carry on the dry goods business. Their investments are 
as follows: 

Shaler invests cash, $3000; stock of goods, $2000; sundry personal accounts due him 
amounting to $1500; and Henry Gorman’s note, $500, with accrued interest, $5. 

Desmond invests cash, $2000; store building and lot, $7000. 

Cunningham’s investment consists of cash, $1500, and 50 shares of Pa. R. R. stock at the 
market value of $120 per share. 

Make one entry for the entire opening transaction, debiting assets and crediting liabilities. 
The only liabilities in this case are to the three partners for the amount of their investments. 
Debit Accounts Receivable for the total of personal accounts due. 

8 Thomas Bender and J. B. Potter have this day formed a partnership and will hereafter 
conduct their respective businesses as one business under the style of Bender & Potter. 

Bender’s statement of assets and liabilities is as follows: 

Assets. — Cash on hand, $1000; stock of groceries, $1125; outstanding accounts, $395; 
store and office fixtures, $890; office furniture, $250. 

Liabilities. — Due sundry creditors on account, $500; notes outstanding, $750. 

Potter’s statement is as follows: 

Assets. — Cash, $1500; stock of coffee, tea and spices, $2000; store lot and building, 
$6000; rent due on part of storeroom, $200. 

Liabilities. — Due creditors on account, $1500; mortgage on store building, $3000. 

Make entry for the opening statement of the new firm. Credit Accounts Payable for the 
total due creditors. Credit Mortgages Payable for the mortgage. 


THE WORKING SHEET 

A Working Sheet is an exhibit on a single sheet of the trial balance, profits and losses, 
assets and liabilities. If adjustments are made after the preliminary trial balance is taken, the 
working sheet will also show the adjustments and the final trial balance. Page 141. 


THE WORKING SHEET 


139 


Exercise 18 

Assume that at the end of December the books of Ames & Hammond show the following 
trial balance, no adjustments having been made: 


AMES & HAMMOND, 

Trial Balance, December 31, 19— 

Cash ..u... 

Notes Receivable. 

Accounts Receivable.„... 

Furniture and Fixtures... 

Delivery Equipment. 

Notes Payable. . . 

Accounts Payable.:... 

J. H. Ames, Capital. 

J. H. Ames, Personal.... 

T. B. Hammond, Capital. 

T. B. Hammond, Personal... 

Sales ........ 

Purchases.i... 

Freight and Cartage....... 

Insurance Prepaid.. 

Selling Expenses...... 

Delivery Expenses... 

General Expenses..... 

Discounts on Purchases.....*. 

Interest on Notes Receivable.. 

Interest on Notes Payable. 

Discounts on Sales. 


1176.75 

700. 

5267.83 


500. 


2600. 

$ 900. 


2250.60 

5000. 

250. 

5000. 

175. 

23305.40 


22984.92 

173.50 
150. 

1263. 

817.50 
367.90 

172.60 

13.75 

62.15 

153.80 


36642.35 36642.35 


No adjustments were made before taking the trial balance, and the following adjustments 
have to be made. 

The inventory of goods on hand is $5826.35; Freight and Cartage bills due and unpaid, 
$27.60; the insurance expense amounts to $75, which sum is to be charged to Selling Expenses; 
wages accrued amount to $73.50 for salesmen, and $36.50 for office workers; interest accrued 
on Notes Receivable amounts to $17.50; interest accrued on Notes Payable amounts to $12.35. 

The following adjustment entries are required. 


Inventory 

Purchases 

$5826.35 

5826.35 

Freight and Cartage 

Freight and Cartage Accrued 

27.60 

$ 27.60 

Selling Expenses 

General Expenses 

Wages and Salaries Accrued 

73.50 

36.50 

110. 

Selling Expenses 

Insurance Prepaid 

75. 

75. 

Interest on Notes Receivable Accrued 

Interest on Notes Receivable 

17.50 

17.50 

Interest on Notes Payable 

Interest on Notes Payable Accrued 

12.35 

12.35 




























140 


ELEMENTARY COURSE 


The adjusting entries, of course, are posted to the ledger as well as entered upon the work¬ 
ing sheet. They might have been entered in the ledger before a trial balance was taken, in 
which case the trial balance shown on the working sheet would be the adjusted trial balance. 

From this adjusted trial balance, it is a simple matter to extend each balance into the 
proper column, either loss, profit, asset, or liability. 

All debit balances on the trial balance are extended into either the loss column, or the 
asset column; all credit balances are extended into either the profit column or the liability 
column. The debits and credits are equal; therefore, Losses + Assets = Profits + Liabilities, 
from which Assets — Liabilities = Profits — Losses. 

Or, stated otherwise, the difference between the assets and liabilities equals the difference 
between the profits and losses. The proof is similar to the proof used for the two statements 
(Profit and Loss and Balance Sheet) with which the student is familiar, except that on the 
working sheet the capital accounts are extended with the liabilities, instead of withheld until 
the conclusion. While either form may be used, the form shown seems to be most convenient. 

The working sheet does not take the place of the Profit and Loss statement and the Bal¬ 
ance Sheet. It is a sort of survey made by the bookkeeper as a preliminary to making the for¬ 
mal statements. 

Study carefully the Working Sheet on page 141, made up from the preceding data. 
Complete the exercise by preparing a Profit and Loss statement and a Balance Sheet in the 
usual form, and make journal entries to close the ledger. 


THE WORKING SHEET 


141 


Q 

£ 

O 

S 

S 

< 

w 

m 

W 

S 

<1 





































































































































142 


ELEMENTARY COURSE 


Exercise 19 


The following trial balance was taken from the books of J. C. Brown, July 1, 19—: 


Cash...$ 2160.50 

Notes Receivable. 3125.50 

Accounts Receivable. 6465.95 

Real Estate. 10000. 

Furniture and Fixtures. 800. 

Insurance Prepaid. 215. 

Notes Payable..—. 

Accounts Payable... 

James C. Brown, Capital..... 

Purchases. 22675.50 

Freight and Cartage. 173.80 

General Expenses. 1016.80 

Selling Expenses. 1365.08 

Real Estate Expenses. 195. 

Interest on Notes Payable. 75.80 

Discount on Notes Receivable. 43.75 

Discounts on Sales. 116.80 

Sales...1. 

Interest on Notes Receivable... 

Discount on Notes Payable. 

Discounts on Purchases. 


$ 5600. 
5560.23 
15000. 


21962.03 

84.12 

47.50 

175.60 


$48429.48 $48429.48 


The following adjustments are to be made: 

Of the Insurance Prepaid, $130 has been used up. Charge $75 to Real Estate Expenses 
and $55 to Selling Expenses. (Credit Insurance Prepaid.) Freight bills due and unpaid 
amount to $43.80. (Credit Freight and Cartage Accrued.) Bookkeeper’s and stenographer’s 
salaries accrued, $45. Clerks’ wages accrued, $54. (Credit Wages and Salaries Accrued.) In¬ 
terest accrued on Notes Payable outstanding, $23.80. Interest accrued on Notes Receivable, 
$56.90. 

Inventory of merchandise unsold, $6578.98. 

Required: 

(а) Adjusting entries. 

(б) Working Sheet, showing preliminary trial balance, adjustments, adjusted trial balance, 
losses, profits, assets, liabilities. 

(c) Journal entries to close. 

(d) Rate of profit on sales. 

( e ) Rate of profit on cost of sales. 

(/) Rate of profit on capital invested. 

























SINGLE ENTRY 


143 


SINGLE ENTRY 

In single-entry bookkeeping the ledger contains only accounts with persons, and conse¬ 
quently only such entries as affect personal accounts should appear in a single-entry journal. 
There is no equality of debits and credits in single-entry bookkeeping, and therefore the journal 
entries will, in most cases, contain only a single debit or credit. (See model below.) 

The rules for journalizing in single entry are exactly the same as in double entry, so far 
as personal accounts are concerned. A good plan for the student who knows double-entry 
bookkeeping, is to decide first what the journal entry would be by the double-entry method. 
Any persons debited or credited in the double-entry journal should be debited or credited in 
the same way in the single-entry journal. All other debits and credits should be omitted. 

Pure single entry; that is, accounts with persons only, is rarely used because the record is 
too inadequate. A cash book, at least, is necessary in addition to the journal. If a transaction 
affects both a personal account and ca^h, the entry may be made in the cash book only, or if it 
is proposed to use the journal exclusively as a posting medium, it may be made in both books. 
In the latter case, the cash book is kept solely as a cash record and no posting is done from the 
cash book. 

In the following illustrations, entries affecting both cash and a personal account are en¬ 
tered in the cash book only; all other entries affecting personal accounts are entered in the 
journal only. 

Study the model of a single-entry cash book, showing the records which would be made 
by single-entry bookkeeping for the transactions shown in the model journal on pages 9 and 
11. The cash book may be kept in the double-entry form if desired. 


MODEL SINGLE-ENTRY CASH BOOK 


DATE 

L.F. 

DR. 

OR. 

OR. 

ACCOUNT AND EXPLANATION 

RECEIPTS 

PAYMENTS 

JMs 

/ 


Ou 


3 o a o 

n 

Cs 

2- 








i/ 


Jbu. 



yro 







Af-MU' 




/3 




/op 






Mu 










S s ~r o 


(,o 

/ / ' 3 









2V3 7 






3 MM P 


3mmo 



3/ 









On the following page is a model of a single-entry journal, showing the records which would be 
made by single-entry bookkeeping for the transactions shown in the model journal on pages 
9 and 10. In single-entry bookkeeping, the journal is frequently called the daybook. 































144 


ELEMENTARY COURSE 














SINGLE ENTRY 


145 



Posting. — Only personal accounts are posted. 

A record of notes issued and of notes received may be kept in a note book, and these rec¬ 
ords, with an inventory taken in the usual manner, will enable the bookkeeper to prepare a 
statement at any time showing the assets and liabilities, the net worth and the net gain of the 
business. 

The cash book shows the amount of cash on hand, $2437. The inventory of unsold mer¬ 
chandise, if taken Jan. 31, would show goods on hand to the value of $1670. The note book, if 
kept, would show a note for $338 in favor of the business, signed by A. B. Frye; and the fol¬ 
lowing notes outstanding — one in favor of Garland & Co. for $571, and one in favor of B. W. 
Keene for $820. 

The ledger, if posted, would show Harper’s investment of $3000, and J. B. Allen’s indebt¬ 
edness of $362.50. 
























146 


ELEMENTARY COURSE 


From the foregoing data it will be easy to prepare a statement of assets and liabilities 
according to the following model: 

Statement of Assets and Liabilities, January 31, 19— 


Cash 

Notes Receivable 
Inventory 
J. B. Allen 
Notes Payable 
A. H. Harper 


on hand 

as per notes receivable book 
merchandise on hand 
owes on account 
as per notes payable book 
net worth 


Asst 

its 

Liabil 

ities 






A. H. Harper’s net gain or net loss may now be found by comparing his net worth with his 
investment, according to the following form: 

Statement of A. H. Harper’s Gain 

A. H. Harper’s net worth January 31, 19— $3416.50 

“ “ “ investment 3000. 


“ “ “ net gain $416.50 

A journal entry is now made crediting A. H. Harper for his net gain, and this entry is 
posted to his account in the ledger. 


CHANGING FROM SINGLE TO DOUBLE ENTRY 

If A. H. Harper should desire to change his books from single entry to double entry, he 
would first prepare a statement of Assets and Liabilities as heretofore explained. He would 
then make a journal entry of the assets and liabilities, debiting the former and crediting the 
latter. The form of the entry would be as follows: 




Cash 

on hand 

2437 






Notes Receivable 

as per N. R. book 

338 






Inventory 

merchandise on hand 

1670 






J. B. Allen 

on account 

362 

50 





Notes Payable 

as per N. P. book 



1391 




A. H. Harper 

net worth 



3416 

50 


Posting. — After this entry is made it should be posted, excepting those accounts which 
are already in the ledger, which should be checked. 

The books would then be on a double-entry basis and ready for the double-entry record of 
further transactions. Any other books desired may be added. 





































SINGLE ENTRY 


147 


AN EXERCISE IN SINGLE ENTRY 

Record the following transactions by the single-entry system, using the journal, cash book, 
notes receivable book, and notes payable book. 

Jan. 1, 19 You have commenced the retail furniture business with the following invest¬ 
ment: a stock of furniture valued at $1968.75; office furniture, fixtures, and books, valued at 
$300; cash in the City National Bank, $1245.50. 

Enter in the journal according to the following form: 

Jas. B. Houghton, Capital Cr. 2210 

Commenced the Furniture business investing as follows: 

Cash in bank, as per C. B. 460 

Furniture valued at 1500 

Office furniture and fixtures 250 

Make an entry in the cash book for the amount of your cash investment. Place a check 
mark in the folio column, indicating that the amount is not to be posted, since it is included in 
your credit in the journal entry. 

1 Bought of the Grand Rapids Furniture Co., Grand Rapids, Mich., on account 30 days, 
furniture as per invoice, $1468.20. 

1 Paid freight on the above invoice, $62.25. (Cash book.) No personal account is 
affected. The entry is made only on account of the cash record. 

2 Sold Wm. Rand, on a/c, invoice of furniture amounting to $92. 

3 Sold sundry items for cash, $104.50. (Cash book.) 

4 Sold Thomas W. Parsons, on a/c, invoice of furniture amounting to $25. 

4 Sold E. M. Wardner, on a/c, invoice of furniture amounting to $130. 

5 Bought of E. M. Farmer & Co., Detroit, merchandise as per invoice, $550. Gave them 
in part payment your note at 30 days for $250; balance on account 4 mos. 

Make two entries in the journal. Credit E. M. Farmer & Co. for the invoice; debit them . 
for the note. Record the note in the notes payable book. 

5 Paid freight on above invoice, $27.50. 

6 Paid rent, $60; insurance premium, $30. 

6 Sold sundry items for cash, $24.75. 

6 Sold Emma B. Sheridan, on a/c, invoice of furniture amounting to $456. Received 
cash on account of same, $150. 

Entry in the journal and in the cash book. 

Balance the cash, writing the balance in red ink in the smaller column. Rule, foot, and 
bring down the balance to commence the next week. 

8 Sold C. H. Stratton, Elm House, invoice of furniture amounting to $385. 

8 Paid Grand Rapids Furniture Co. on account, $500. 

8 Sold sundry items for cash, $46.50. 

9 Sold Wm. M. Rand, on a/c, invoice of furniture amounting to $191. Received cash on 
a/c, $100. 

10 Bought of E. F. Higgins & Co., Michigan City, Ind., furniture as per invoice, $498.75. 

10 Paid freight on the above invoice, $24.93. 

11 Paid cash for books and stationery, $7.50, and for a horse and delivery wagon, $275. 

12 Sold Mrs. Edward Leary, on a/c, invoice of furniture amounting to $144. Received 
cash on account, $44. 

12 Sold sundry items for cash, $28.75. 

13 Received of T. W. Parsons cash in full of account, $25. 


148 


ELEMENTARY COURSE 


13 Sold Edward Strang, on a/c, invoice of furniture amounting to $86.50. 

13 Paid for clerk hire, $30. 

Balance the cash book. 

15 Received of C. H. Stratton his note at 60 days, to pay invoice of the 8th inst. Enter in 
the journal, and record the note in notes receivable book. 

15 Paid the balance of E. M. Farmer & Co/s invoice of the 5th inst., $300, less 5% of the 
full invoice. Discount $27.50; cash paid, $272.50. Debit E. M. Farmer & Co. in the cash 
book with the amount of cash paid, and in the journal with the amount of the discount. The 
two entries, when posted, will balance E. M. Farmer & Co/s account, 

15 Cash sales of merchandise, $48.50. 

16 Bought of the Grand Rapids Furniture Co. merchandise invoiced at $1262.75. 

16 Paid freight on the above invoice, $63.13. 

16 Sold Thomas W. Parsons, on a/c, invoice of furniture amounting to $213. 

17 Paid for advertising, $12; for shoeing horse, $1.25. 

17 Sold Richard Vose, on a/c, invoice of furniture amounting to $159.50. 

17 Cash sales, $38.75. 

18 Bought of E. M. Farmer & Co., net 4 mo., 5/10, furniture invoiced at $490.50. 

18 Paid freight on above invoice, $24.50. 

19 Bought of J. D. Lansing & Bros., on a/c 90 days, 5/10, furniture invoiced at $633.25. 

19 Paid freight on above invoice, $31.66. 

19 Sold Morris Chaney, on a/c, invoice of furniture amounting to $52.50. 

19 Cash sales, $47.75. 

20 Sold H. M. Preston, on a/c, invoice of furniture amounting to $141. 

20 Bought of Phillips Chair Co., Phillipsburg, Ind., net 4 mo., 5/10, furniture as per in¬ 
voice, $244.75. 

20 Paid freight on above invoice, $12.24. 

20 Paid for hay and oats, $7.50; clerk hire, $20; postage and express charges, $2.50. 

20 Cash sales, $69.87. 

20 Sold Hunter & Allison, on a/c, invoice of furniture amounting to $250. 

Balance the cash book. 

22 Received of E. M. Wardner, to balance account of Jan. 4, cash, $30, and his note at 30 
days, with interest, $100. 

22 Received of Mrs. E. Leary $15, to apply on account. 

22 Cash sales, $62. 

22 Received of Edward Strang $50, to apply on account. 

22 Sold Emma B. Sheridan invoice of furniture amounting to $86. 

23 Hunter & Allison return goods for credit, $10. 

23 Bought of E. F. Higgins & Co. furniture as per invoice, $235.75. 

23 Paid freight on above invoice, $11.75. 

24 Accepted E. F. Higgins & Co/s draft at 30 days, for amount of invoice of Jan. 10, 
$498.75. 

24 Sold C. H. Stratton, on a/c, invoice of furniture amounting to $273. 

25 Have C. H. Stratton’s note of Jan. 15 discounted at the bank, and receive cash for 
proceeds. Face of note, $385; discount 50 days. Enter for net proceeds in cash book. No 
entry need be made for the discount, since the single-entry record is not concerned with it. 
Mark the note “Discounted” in the note book. 

25 Sold E. M. Wardner, on a/c, invoice of furniture amounting to $90.50. 

25 Bought of the Phillips Chair Co. merchandise as per invoice, $192.85. 


SINGLE ENTRY 


149 


25 Paid freight on above invoice, $9.65. 

26 Paid Lansing Bros, for invoice of the 19th, less 5%. Debit Lansing Bros, in the cash 
book with the amount of cash paid, and in the journal for the amount of the discount. 

26 Cash sales, $84.60. 

27 Received of Hunter & Allison, to balance account, cash, $40, and their note at 4 mo., 
with interest, for $200. 

27 Sold Edward Strang, on a/c, invoice of furniture amounting to $39.50. Received $50 
to apply on account. 

27 Balance the cash book. 

29 Sold Richard Vose, on a/c, invoice of furniture amounting to $27.50. Received $50 to 
apply on his account. 

29 Returned to the Phillips Chair Co. goods for credit, $36. Debit Phillips Chair Co. 

29 Cash sales, $91.40. 

30 Paid Phillips Chair Co. for invoice of Jan. 20, less 5%. 

30 Bought of Lansing & Bros. 4 mos., 5/10, merchandise as per invoice, $498.70. 

30 Received from H. M. Preston, on a/c, $75. 

30 Sold Morris Chaney, on a/c, invoice of furniture amounting to $46.50. 

31 Paid clerk hire, $30. 

31 Cash sales, $62.87. 

31 Sold Mrs. E. Leary, on a/c, invoice of furniture amounting to $61.50. Received cash 
to apply on account, $25. 

Balance the cash book. Open ledger accounts with persons only, and post from the cash 
book and journal all items affecting' those accounts. Since there is no equality of debits and 
credits, it is impossible to take a trial balance. 

Your inventory shows merchandise on hand, valued at $5040.75; horse and wagon, valued 
at $275; office furniture, fixtures, and books, valued at $275; insurance prepaid, $27.50. 

Find from your ledger the amounts due from personal accounts; from your notes receiv¬ 
able book and notes payable book the value of notes on hand, also the notes outstanding. From 
your ledger find the balances due from you to other firms. 

Prepare a statement of assets and liabilities. Determine the net profit. Make and post a 
journal entry, crediting your capital account with the net profit. 

Make the necessary entries to change the books from single to double entry. Post to the 
ledger, take a trial balance, and submit to your teacher for approval. 

REVIEW QUESTIONS 

1 What is the distinction between personal and impersonal accounts? 

2 How are impersonal accounts subdivided? 

3 What is insolvency? 

4 How are assets classified with reference to their availability for use in the business? 

5 What are current liabilities? Deferred liabilities? Fixed liabilities? 

6 How should assets and liabilities be arranged on the balance sheet? 

7 What should a bookkeeper do upon taking charge of a set of books? 

8 If an asset or liability is omitted from the opening entry, how is the omission corrected? 

9 How is Cash Short and Over treated? 

10 What is a protest? 

11 How should errors be corrected ‘f they are not discovered until after the entries have 
been posted? 


150 


ELEMENTARY COURSE 


12 Into what two classes are books of account divided? 

13 What is a stock book? 

14 Does a stock book make it unnecessary to take a physical inventory? 

15 Describe two different ways of handling discounts where no special column is provided 
in the cash book. 

16 What is accrued interest? Prepaid interest? 

17 If the proceeds of an invoice are given, how is the face of the invoice found? 

18 What is the rule for making opening entries? 

19 What is a working sheet? 

20 How does single entry differ from double entry? 

21 How is it possible to find the profit or loss in single entry? 

22 What is necessary in order to change from single entry to double entry? 



ADVANCED COURSE 


Based upon the Neal dC Cragin edition of Modem 
Illustrative Bookkeeping, Advanced Course, with 
revised classification of accounts and financial state¬ 
ments by Charles F. Rittenhouse, C. P. A. 


(NEW M. I. B. ELEM AND ADV.) 























' 








































♦ 


















» 


















































































































































• I 




























INTRODUCTION 


The Advanced Course is designed to show the application of the principles of bookkeep¬ 
ing to the records of special lines of business; the development of the simple forms of books 
into special forms; and the classification and subdivision of accounts. 

The lines of business selected are representative of four important departments of busi¬ 
ness activity retailing, commission, wholesaling, and manufacturing. In connection with 
each, approved forms of records are shown, and modern methods of business procedure are 
explained and illustrated. 

The student in taking up the work of the Advanced Course will be dealing in a sense with 
the selfsame transactions as in the Elementary Course, namely, goods are bought and sold, 
payments are made and received, notes are issued and redeemed, expenses are incurred, losses 
suffered, and profits realized. The difference between the elementary work and the advanced 
work consists in the use, in the advanced work, of certain labor-saving forms whereby is mini¬ 
mized the necessary burden of recording transactions. In fact, the object of advanced book¬ 
keeping is found in its endeavor to perform the work of the bookkeeper more expeditiously and 
easily. Of course many new things will be covered and the student will have occasion to en¬ 
large upon the work that has already been covered in the Elementary Course, namely, many 
new accounts will arise in the form of assets and liabilities, and profits and losses. The applica¬ 
tion of these new accounts to the balance sheet, and the profit and loss statements, will be on a 
broader and more comprehensive scale. 

Bookkeeping and Accounting. — Accounting includes Bookkeeping, as the term is generally 
understood, and covers the whole field of account keeping, while Bookkeeping is restricted to 
a particular part of the field, namely, the records of the transactions. 

Accounting deals chiefly with the scientific arrangement of the forms of the record mediums, 
such as the books, etc., the classification of the accounts, so as to cause them to show in detail 
the results and condition of the business, and with the statements of these results and condi¬ 
tion. Bookkeeping deals chiefly with the making of the records, according to the classification 
of the accounts, and the arrangement of the forms of the record mediums, suggested by the 
principles of accounting. A person who makes the records of business transactions is called 
a “ bookkeeper.” One who performs the work of classifying accounts, arranging the forms of 
record mediums, supervising the records, and making statements of the results and condition 
of a business is called an “ accountant.” A person who examines the records for the purpose 
of verifying their accuracy is called an “ auditor.” 

Business men are now giving more attention to the character of the statements submitted 
to them by their accountants or bookkeepers, and employers may at any time call for state¬ 
ments that' shall be comprehensive enough to provide them with exact information as to the 
general details of their business condition. These requirements have led to the present revi¬ 
sion of this text so that the bookkeeper may be enabled to prepare statements that will be 
standard in form and usage, and of such character that an employer will be able to read from 
them easily and intelligently, the exact condition of his business. Business men have learned 

(NEW M. I. B. ELEM. AND ADV. 153 


154 


INTRODUCTION 


that the proper kinds of business and financial statements are highly important and necessary, 
since they tend to insure success in many ways. 

It has not been long since many business houses were satisfied with using merely a single 
entry system of bookkeeping. The finding of an inventory of assets and liabilities at the end 
of the year was considered a fair basis for the determination of the financial condition of the 
business. From this form of inventory accounts were classified as to assets and liabilities, and 
this classified list was called a balance sheet. The difference between the assets and liabilities 
would show the surplus or deficit. The profit or loss for a given period was determined by 
comparing the surplus or deficit at the end of the period with that of the beginning of the period. 

This form of statement was unsatisfactory as it would show only the extent of the profit 
or loss, and would not show how either was made. Ordinarily such a statement was made at 
the end of the year, and as it then showed results in an unsatisfactory way, the demand grew 
for more frequent statements, which should be in more definite and detailed form, so that such 
questions as “ How was this profit secured? ” or “ How was this loss sustained? ” can be 
satisfactorily answered. 

With the aid of double entry bookkeeping and the use of nominal and real accounts, a more 
accurate and detailed form of profit and loss statement could be made and a balance sheet 
prepared. These statements mean much to the business man of td-day and they are made an 
important feature of the Advanced Course. The student comes in contact with many new 
nominal and real accounts, and through the medium of adjustment entries, which are taken up 
at the end of each unit of work, is thereby enabled to prepare profit and loss statements and 
balance sheets that reflect the true financial condition of any business. 

In the Advanced Course the student will perform the duties of bookkeeper, accountant, 
and auditor. It should also be noted that the prices of commodities, appearing in the various 
forms and transactions, are generally below the normal market quotations. The purpose, how¬ 
ever, of this work is primarily to give practice in billing and to encourage individual effort on 
the part of the student and not to teach market conditions and prices, which are always subject 
to more or less fluctuation. 


(NEW M. I. B. ELEM. AND ADV.) 


RETAIL GROCERY BUSINESS 


The following transactions are designed to illustrate a system of bookkeeping for a modern 
retail grocery business, at first by single entry, after which will be shown the method of chang¬ 
ing from single entry to double entry, of continuing the business by double entry, and of in¬ 
cidentally showing the use of the card ledger system of bookkeeping. 

Single entry books differ from those used in double entry bookkeeping chiefly in the fact 
that a single entry ledger contains only accounts with persons, all property and loss and gain 
accounts being omitted. 

The principle of equal debits and credits, belonging to double entry, is not a part of single 
entry bookkeeping, and consequently no equality exists between the debit and credit sides 
of the ledger, and no trial balance can be taken of a single entry ledger. 

An account with cash should be kept in the cash book, as in double entry bookkeeping, 
and by means of notes receivable and notes payable books it will be easy to keep a record of 
notes receivable and notes payable. A record of merchandise may be kept by the use of a 
purchases journal and a sales book. 

In a well-arranged set of single entry books it is possible to show as complete a record of 
the business as in a set of books kept by double entry, but it will not be in so compact a form, 
and it requires more work on the part of the bookkeeper. 

Proof of Posting. — While no trial balance can be taken of a single entry ledger, the cor¬ 
rectness of the posting can be determined with the same degree of accuracy as in a double entry 
ledger, by proving the posting. This is done by finding first, the total of the charge postings 
in the ledger for the month, and the total of the charge entries in the books of original entry, 
and then comparing the two amounts; second, by finding the total of the credit postings, and 
the total of the credit entries in the books of original entry, and then comparing the two 
amounts. This is called a proof of posting. 

Books Used. — In order that a complete record of the following business may be obtained 
by single entry, the books used will be as follows: journal, cash book, abstract sales book, 
purchases journal, notes receivable and notes payable books, general ledger, and card ledger, 
using the card ledger only for customers’ accounts. A simpler, but less effective, set of 
single entry books would consist of journal, cash book, and ledger. 

Journal. — The journal contains such debits and credits to personal accounts as are not 
entered in the cash book and on the sales sheets, from which the abstract sales book is made 
up. The abbreviation Dr. or Cr. is written after the title of the account, in each entry, and 
the explanation underneath. The form on page 156 illustrates the journal. 

Sales Slips. — In most modern grocery stores sales slips are used, and when sales of mer¬ 
chandise on account are made, the slips are written in duplicate by means of carbon paper 
by the salesman as he takes the order, verbally, or from an order book. The form on page 157 
illustrates the sales slip. 

The original and duplicate sales slips are sent to the office to have the prices O.K.’d. The 
original is retained by the bookkeeper, the duplicate being sent with the goods when they are 

155 


156 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Journal 




/ 


'f 




















ADVANCED COURSE 


157 



delivered. Since the customer re¬ 
ceives a complete bill with each lot 
of goods purchased, there is little 
chance for mistakes, or for a dispute, 
when the weekly or monthly state¬ 
ment is rendered. The bookkeeper 
enters the amount of each sales slip 
upon his abstract sales sheet for the 
day. 

Abstract Sales Sheet. — The form 
on page 158 illustrates a daily ab¬ 
stract sales sheet, in which the names 
of the customers and the amounts 
of the sales on account are given, to¬ 
gether with the cash sales for the 
day, and total daily sales. 

Many bookkeepers keep an abstract 
sales book in the form shown on page 159, 
and post directly from this book to the 
customer’s account in the ledger. A 
better method is to enter the amount of 
each sale on account in the abstract sales 
sheet for the day, and to carry only the 
total of the day’s sales to the abstract sales 
book at the close of each day. Then post 
daily the items from the sales slip to the 
customer’s monthly statement sheet, and 
carry only the total of this monthly sheet 
to the debit of the customer, at the end of 
the week or month, on his ledger card, or 
page, in case a book is used instead of 
cards. This method is preferable, as these 
sales slips are original entries, and it is to 
them that reference must be made if any 
discrepancy exists between an account 
rendered and the record kept by a cus¬ 
tomer. The bookkeeper should post these 


Sales Slip 


THOS. E SEARS 

'Rochester, N. Y. 6^— 19 

cAdd 

TIMS TAK 


EN 

WHEN WANTED / 

TRANSACTION 

SALESMAN 

4^- 


ARTICLES 

/CP 

BOXES 

/ 

JUGS BROOMS 

/ / 

t 



33 

2 

/ 2— 


3 /7 

3 



<r2 

4 



/7.c~ 

5 



/ ,r~ 

6 



3.4- 

7 




8. 

'/*.* CPk-j. 


3 // 

9 



P2-3 

10 

/ O/ _ 



U 

12 


2 

77 

13 




14 




15 




16 




17 




18 




PLEASE RETURN THIS BILL IN CASE OF ERROR. 

HANUYACTUAIA UWOCft AATINTA 0» TM« OAATf ACAOMI COMPANY, LIHITtO. NIAOAAA AAUA, N.Y. 


































































158 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 



sales slips daily to the monthly statement sheets. When the posting is completed, the sales slips should 
be filed alphabetically, or each day’s slips placed in a separate package, so that they may be readily 
accessible, should they be required to verify a customer’s monthly statement after it has been rendered. 

Cash Sales. — For sales of merchandise for cash, a sales slip is used similar in form to that 
used for sales on account, as shown on page 157, except that it is receipted when the goods 
are delivered; or, if the sale is made in the store, the customer is given a cash ticket, which 
is presented with the money to the cashier, who files the ticket with the cash sales slips. The 
sum of the amounts of these tickets and of the cash sales slips represents the sum of the cash 
sales of the day, and should be carried to the Sales for Cash column of the abstract sales book, 
and also to the debit side of the cash book. (See form of abstract sales book, page 159, and 
the description of cash book, page 162.) The sum should also be entered at the end of the 
abstract sales sheet for the day, as shown above. 

In retail stores where a cash or partly cash business is done, the cash register is now quite generally 
used. This is a combination cash drawer and record machine, and it is designed, among other things, to 
prevent mistakes and fraud in handling the cash. The cash register records the amount of the purchase 
on a strip within the machine, and at the same time indicates this amount on the outside where it can 
be easily seen by the customer. The cash in the register at any time should, of course, agree with the 
record on the strip. Some cash registers have special arrangements for recording and exhibiting the 
various sources from which the cash is received, and for other information, as “Cash Sales,” “Cash Rec’d 
on Acct.,” “Charge Sales,” etc. A cash register of this kind is generally used in connection with a suitably 
adapted charge and credit system for customers’ accounts. 

Abstract Sales Book. — The abstract sales book contains columns for date, number of daily 
abstract sales sheet, sales on account, cash sales, total daily sales, total weekly sales, and total 
monthly sales, so that the book will show at a glance each day’s business, both cash and credit, 
the sum total, and the total sales at the end of each week and month. 






















ADVANCED COURSE 


159 



It is evident that the sum of the footings of the Sales for Cash and Sales on Account col* 
jimns of the abstract sales book will at any time show the total sales of merchandise to date. 
The above form illustrates the abstract sales book. 

In the series of transactions following, the daily abstract sales sheet will be used according to the form 
shown on page 158, and the abstract sales book will contain only totals, as shown in the above form. 


PURCHASES JOURNAL 



Purchases Journal. — The purchases journal is an abstract of the invoices of merchandise 
purchased in the regular course of business. Where the old form of invoice book is kept, it 
would be unnecessary to keep the purchases journal, since all the records of the invoices and 
















































160 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Model Form of Double Entry Cash Book for November 

Cash Receipts 


Date 


19 

Nov. 


Nov. 


«. ■ - 

w Y 


19 

Dec. 


15 


22 


29 


29 

29 

29 

29 


Accounts Cr. 


Explanations 


Balance 

M. E. Lynaugh 

Mdse. Sales 

Mrs. F. Cooper 

J. A. Smith 

Mrs. A. Jackson 

Mdse. Sales 

A. B. Hooper 

Mrs. S. T. Jones 

P. J. Black 

T. B. Odell 

Notes Receivable 

Mdse. Sales 

E. B. Hyde 

Mrs. A. Dolan 

E. L. Doran 

C. A. Murdy 

Jas. B. Long 

Notes Receivable 

Interest on Notes Rec. 

Mdse. Sales 
Mrs. S. T. Jones 
Mrs. J. Judd 
Wm. Black 
Edward Cooper 
T. B. Hazen 
Notes Receivable 
Interest on Notes Rec. 

Mdse. Sales 

Mrs. A. Jackson 

Mrs. J. Judd 

J. B. Long 

Horses. & Wagons 

Notes Receivable 

Accounts Receivable Cr. 

Sundries Cr. 

Discount on Notes Receivable Dr. 
Cash Dr. 

Balanqe November 1, 19— 


Note. — In this model of Cash Book 
omitted, but in actual work they should 


Balanoe 


Accounts 
Receivable 
Cr. 


the explanations are 
always be supplied. 


24 

25 
9 

38 

15 

19 

30 


6 

20 

23 

26 

25 


5 

25 

26 
26 
50 


5 

24 

25 
90 


541 


25 

48 

30 

34 


73 

68 

95 


66 

41 

07 


80 


Sundry 

Cr. 


578 

221 


288 


842 

362 


112 


422 


622 

6 

436 


168 


4063 


37 

45 


74 


68 

28 


40 

93 

16 


85 

32 

98 


75 

91 


Discount 

on 

Notes Rec. 


96 


10 


75 


71 


Net 

Receipts 


131 


799 


58 

288 


102 

833 


102 

475 

422 


133 

629 

436 


144 

167 


4595 

131 


4726 


963 


55_ 

82 


73 

74 


64 

72 


36 

61 

16 


14 

17 

98 


93 


55 


55 


05 




























































ADVANCED COURSE 


161 


Model Form of Double Entry Cash Book for November 

Cash Disbursements 


Date 


19 

Nov- 


19 


15 


22 


29 


29 

29 

29 

29 

29 


Accounts Dr. 


Smith & Brown 
Amer. Paper Co. 

F. H. Smith & Oo. 

Jones Bros. 

U. S. Market Co. 

General Expense 
Office Supplies 
General Expense 
Freight In 
Salaries 
Marsh 
(Student) 

Cobb Bates & Jones 
Park & Jackson 
F. H. Smith & Co. 

Brown & Co. 

Nielsen & Co. 

M. S. Baker & Sons 
Horses & Wagons 
Horses & Wagons 
U. S. Market & Co. 
General Expense 
Stable Expense 
Horses & Wagons 
Freight In 
Salaries 

Smith & Brown 
Held Grocery Co. 

Notes Payable 
Interest on Notes Pay. 
Brown & Co. 

Amer. Paper Co. 

Insurance 

U. S. Market Co. 

Stable Expense 
Stable Expense 
Salaries 

General Expense 
Freight In 
J. M. Marsh 
(Student) 

Huff cut Bros. 

S. M. Thompson & Co. 
Smith & Co. 

Stable Expense 
General Expense 
Salaries 
Freight In 
U. S. Market Co. 

Smith & Brown 
Horses & Wagons 
M. S. Baker & Sons 
Brown & Co. 

Nielsen & Co. 

U. S. Market Co. 

Freight In 
Stable Expense 
Stable Expense 
Salaries 
J. M. Marsh 
(Student) 

Accounts Payable Dr. 
Sundries Dr. 

Discount on Purchases Cr. 

Cash Cr. 

Balance 


Explanations 


Accounts 

Payable 

Dr. 


100 

114 

144 

43 

8 


72 

70 

94 

44 


162 

68 

68 

132 

142 

18 


28 


100 

151 


98 

69 


74 

74 

94 

21 

38 

39 


65 


109 

86 

102 


46 

100 

48 

116 

178 

62 


2303 


15 


37 

98 


49 

29 

40 


28 


13 

20 

95 

46 


55 


Sundry 

Dr. 


50 

2 

4 

2 

12 

20 

25 


50 

75 

17 


125 

100 

1 

5 

31 

1 

54 


458 

1 


35 

63 

1 

10 

54 

1 

17 

60 

50 


10 

10 

54 

1 


125 


4 

10 

1 

54 

25 

25 


25 


1508 


96 


95 

53 


42 

25 


87 

42 


45 


27 

25 


04 


Discount 

on 

Purchases 


1 

10 


25 

34 


37 

07 

64 

85 

37 


56 


97 

70 


48 


09 


Net 

Payments 


100 

113 

134 

43 

8 


47 

36 

94 

44 


116 

162 

67 

63 

129 

139 

18 


28 


318 

100 

143 


96 

69 


42 

74 

37 

87 

57 

53 

02 


65 


21 

59 


40 

28 


753 

107 

83 

101 


75 

46 
100 

47 
113 
173 

62 


244 


3763 

963 


44 

30 

70 

38 


45 

28 


65 

88 

58 

46 


52 


50 

05 


4726 


55 























































162 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


also the items of these purchases would 
be found in the invoice book. Many 
bookkeepers, however, keep a purchases 
journal, and file the invoices loose, in¬ 
stead of pasting them into a book. In 
this series of transactions, no invoices 
are received by the student, but an ab¬ 
stract of invoices is kept in the pur¬ 
chases journal, which contains columns 
for the date of the invoice, the ledger 
folio, the name of the person or firm 
from whom the goods were bought, the 
terms of payment, the due date, the 
date of payment, the amount of the in¬ 
voice, the discount, and the amount 
paid. The form on page 159 illustrates 
the purchases journal. 

It is evident that the footing of 
the Amount of Invoice column in the 
purchases journal will, at any time, 
show the amount of purchases, and 
this amount will be the cost of pur¬ 
chases at any date. The total footing 
of the columns of the abstract sales 
book will show the amount of sales 
at any time. 

Cash Book. — The cash book used 
in single entry does not differ materially 
from the simple form of cash book used 
in the Introductory Course. The left- 
hand page contains a record of all cash 
received, and the right-hand page a 
record of all cash paid out; also a 
special column for discount on pur¬ 
chases allowed on bills paid within the 
specified date. When such accounts 
are posted, two debit entries should be 
made on the personal account affected, one for the discount on purchases, and one for the net 
amount paid, thus canceling the amount of the invoice. 

It is not necessary in a single entry cash book to write the name of the account affected by 
the transaction, except when it is a personal account, as only accounts with persons are kept in 
the ledger, and only those entries in the cash book which affect personal accounts will be posted 
to the ledger. 

Customers’ Statements. — In most grocery establishments where modern methods are in 
use, the items from the sales slips are not posted to the ledger account of the customer, but 
instead are posted directly from the sales slips to a monthly statement sheet, which at the 
end of the month is handed, or mailed, to the customer, and the total only of this sheet is posted 

























ADVANCED COURSE 163 

to his account in the ledger. When a statement sheet is handed in with cash to make 
payment of the account, the sheet is receipted and returned to the customer, who re¬ 
ceives credit in the ledger for the amount of his payment in the regular posting from 
the cash book, where the payment should be entered when made. The postings to the state¬ 
ment sheets should be made at the end of each day before the sales slips of that day are. 
filed away for reference. The form on page 162 illustrates a customer’s statement sheet. 

A shorter method would consist in posting to the customer’s statement sheet only the totals 
of the sales slips, not repeating the items on the statement sheet. This would save a large amount 
of work to the bookkeeper, and if the customer keeps his sales slips delivered with each order, he 
can readily compare his statement sheet with his sales slips; but in practice it is found that cus¬ 
tomers do not invariably keep these sales slips, and there are more likely to be disputes about the 
amount of the monthly statement than when the items are repeated on the statement sheet as here 
illustrated. 

Many small retailers keep only two books — cash book and ledger — in connection with the 
sales slip and statement system. They keep the original sales slips in alphabetical order in a cabinet, 
which contains wire racks or clips, and the statements in an account file, as explained below. 

Ledger Account File. — Each day, after the customers’ statement sheets are posted, they 
should be placed in an indexed file where they are readily accessible, and from which they 
should be removed as soon as the month’s work 
is posted, and handed, or mailed, to the customer. 

An excellent form of file is the ledger account file 
shown in the accompanying illustration, which can 
be put in the safe at night, the same as an ordi¬ 
nary ledger. 

Loose Leaf and Card Ledger Systems. — 

The system of bookkeeping by means of loose sheets 
and cards, properly indexed, in place of books, has 
grown rapidly in favor during the past few years; 
this is especially true in business houses where 
there are numerous departments, and where large 
number of books would be necessary in order to 
keep a complete record. The records of the day are made on loose sheets, and these sheets 
are handed to the head bookkeeper, who places them in properly arranged files, so that 
the record of each day’s business in every department is readily accessible. Out of this system 
of account keeping has grown what is known as the card ledger , a method of keeping ledger 
accounts on cards which possesses many advantages, among which are the following: 

First, the *edger kept by this system contains no accounts with persons who have ceased 
to do business with the firm, for as soon as a customer closes his account, either by remov¬ 
ing from the place, or by transferring his custom to some other business house, his card is 
taken from the receptacle containing the ledger cards and placed in a file kept for accounts 
that have been closed. If the customer returns, the card may be taken from this file and 
replaced in the ledger receptacle. In taking a trial balance, or an abstract of his customers’ 
ledger, therefore, the bookkeeper has only live accounts to deal with, and there is less liability 
to make mistakes. 

Second, the cards are easily handled, and once the cabinet has been purchased, the ledger 
can be extended at a small expense, the cards costing little more than ordinary writing paper. 
In case statements are desired promptly, a ledger of a thousand customers’ accounts could be 
worked upon at the same time by the entire office force, while with a book ledger but one 


Ledger Account File 













1G4 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 



person can work on statements at a time. In case of disputes regarding accounts, where it is 
necessary to produce the books in court, the ledger card or loose sheet containing the account 
in dispute can be produced without interfering with the work of the accountants at the 
office. 

An objection sometimes urged against the card system is that it is difficult in posting to 
find the individual cards, and the cards are liable to get misplaced; but if properly indexed, 

and carefully placed, there t is no difficulty 
Form of Card Ledger from this source. The cards can be found 

as readily and as surely as the pages of cus¬ 
tomers’ accounts in an ordinary ledger. 

The accompanying cut illustrates the form 
of a card ledger indexed numerically. If the 
number of customers is not too large, the 
alphabetic arrangement is preferable, as it 
requires no other index. If the business is 
very extensive, however, it is better to num¬ 
ber each customer and divide the ledger into 
hundreds, then subdivide the hundreds into 
tens. A small tab at the top of each card is 
provided for a number, and an index book 
or a card index is kept for the names corre¬ 
sponding to the numbers. 

The card itself does not differ in ruling 
from the ordinary ledger page. In posting to 
the ledger card, first enter in the explanation 
column the dates of the sales slips that make up the customer’s statement sheet, then enter 
the total of the statement in the debit money column. It may require two or three lines of 
the explanation space to write the dates of the sales slips, but these dates will save a great 
amount of labor in looking up sales slips from the daily files in case of a disagreement between 
a customer’s account as kept by him and as kept by the bookkeeper. The following cut 
illustrates a form of ledger card. 














































ADVANCED COURSE 


165 


PRELIMINARY WORK 

October 1, 19— 

You have this day purchased of Adams & Hackland their entire stock of groceries, in the 
store situated at #222 Division St., and invoiced at $2993.33, for 75% of the invoiced value, 
for which you have paid cash. The net value of this stock of merchandise represents your 
merchandise investment; you also invest $300 in cash. 

You have agreed to collect the accounts due Adams & Hackland and allow them 95% 
of their face value, and become responsible yourself for any losses which may arise from bad 
debts. 

The following customers of Adams & Hackland owe the amounts opposite their names. 


Mrs. S. T. Worthen, 

26 Laurel St., 

$23.45 

A. B. Ryder, 

61 Spring St., 

44.28 

C. H. Stratton, Elm House, 

Central Square, 

212.40 

Mrs. Wm. Hanson, 

28 Summer St., 

31.42 

Wm. Harper, 

62 East St., 

38.49 

Edward Austin, 

31 Green St., 

28.74 

Mrs. F. Gilford, 

44 Brown St., 

21.39 

E. L. Corey, 

, 54 Brown St., 

18.96 

Mrs. A. Waldron, 

82 Chestnut St., 

39.48 

P. J. McGuire, Cottage Hotel 

52 Ann St., 

169.34 



$627.95 


You have agreed to pay Adams & Hackland the amount of 95% of these bills within three 
months after Oct. 1. You have also agreed to continue the lease of the store #222 Division 
St. until Jan. 1, at the present rental of $50 per month, and to retain the store clerks, Thos. 
Stuart and Eugene Canfield, at a salary of $12 per week each, and J. M. Marsh as delivery 
clerk at $20 per week, he furnishing a horse and a delivery wagon. 

Make an entry in the journal, giving yourself credit for the net value of the merchandise; 
in the cash book credit yourself with $300 invested. In the journal credit Adams & Hack- 
land with 95% of the value of accounts purchased of them (see model journal, page 156); also 
enter a memorandum of the customers’ balances in the journal. 

In this series of transactions the card ledger is used, as explained and illustrated on pages 
163, 164. 

Take from your package of business forms the blank cards for your customers’ card ledger, 
and enter on the debit side, after the name and address of each person have been written, 
the amount due, under date of Oct. 1, writing Balance in the explanation column. Use the 
alphabetic arrangement for your card ledger, and keep the ledger cards in the original envelope, 
in front of the blank cards. 


TRANSACTIONS 

October 1, 19— 

Bought of Hackett Bros., City, on account, 60 ds., 2% 10 ds., 10 bbl. N. S. flour at $5; 
10 bbl. Redcloud at $4.50; 5 bbl. pastry at $5.50. 

Enter your purchases in the purchases journal. (See model, page 159.) 



166 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Bought of E. J. Dunn Grocery Co., City, 4 mos., 5% 10 ds., 2 hf. cht. Young Hyson tea, 
140 lb., at 32^; 2 hf. cht. Oolong, 100 lb., at 47^; 2 hf. cht. Eng. Breakfast, 120 lb., at 30^; 
2 bags Rio coffee, 250 lb., at 10^; 1 bale Mocha, 150 lb., at 22^; 2 mats Java, 150 lb., at 21fi. 

Bought of the American Sugar Refining Co., New York, on account, 30 ds., 1% 10 ds.., 
5 bbl., 1565 lb., G. sugar at 5J^; 2 bbl., 622 lb., C. sugar at 5 

Purchased, for cash, of Gray Bros., City, 20 bu. potatoes at 40$£; 5 bbl. apples at 
$1.50. 

Purchased, for cash, of Williams & Andrews, City, 60 doz. fresh eggs at 20^; 120 doz. 
case eggs at 15^. (No entry in cash book at this time.) 

The following ten sales slips have been handed in by the salesmen. 

No. 1 Mrs. S. T. Worthen, #26 Laurel St., 3 lb. butter at 25^; 12 eggs, 20^; 1 pk. apples, 
20^; 1 pk. potatoes, 15^; 1 gal. K. oil, 12^; 1 lb. M. & J. coffee, 32£. 

Make out a statement sheet for each person named on the sales slips, and enter the items 
of each day’s sales on the statement sheets, allowing a line for each item. Keep your state¬ 
ment sheets in alphabetical order in your large envelope. In actual practice, the statement 
sheets would be placed in the ledger account file, and at the end of the day the slips would 
be placed in an envelope or file and marked with the current date; as, Oct. 1, 19—, so that if 
any dispute arose regarding the sales slips, they could be readily referred to. (See model of 
statement sheet, page 162; see illustration of ledger account file, page 163.) No entry for 
a sale is made in the books. 

« 

The grocer who keeps his books in the old style enters all his credit sales on a blotter, posts from the 
blotter to the ledger, and makes out his statements from the ledger at the end of the month. The modern 
grocer posts the sales slips directly to the customers’ monthly statement sheets, and at the end of the 
month the statements are ready for the customers, as the bookkeeper should do his posting at the end 
of each day. The footings only of the statement sheets are carried to the customers’ ledger. 

No. 2 A. B. Ryder, # 61 Spring St., 1 lb. E. B. tea, 60^; 1 lb. M. & J. coffee, 32j£; 1 pkg, 
gelatine, 15^; 2 lb. raisins at 16^; 10 lb. butter at 23^; 12 S. F. eggs, 24^. 

No. 3 C. H. Stratton, Elm House, 1 tub butter, 40 lb., at 22^; 10 doz. case eggs at 
18j£; 2 bbl. apples at $1.75; 1 bbl. N. S. flour, $5.50; 4 sacks pastry flour at $1.50. 

No. 4 Mrs. Wm. Hanson, #28 Summer St., 2 pkgs. rolled oats at 12; 2 lb. lard at 

15^; 5 doz. case eggs at 18^; 6 cans tomatoes at 10^; 6 cans corn at 10^; 20 lb. G. sugar at 

6^; 2 lb. Rio coffee at 20^; § lb. W. pepper at 40^. 

No. 5 Wm. Harper, #62 East St., 2 lb. butter at 26^; 1 box boneless codfish, 45^; 1 can 
tomatoes, 10j£; 1 bu. potatoes, 60^; 1 pk. apples, 20^; 1 lb. Y. H. tea, 50^. 

No. 6 Edward Austin, #31 Green St., 1 bbl. N. S. flour, $5.50; 2 lb. cream cheese at 
16^; 1 lb. Y. H. tea, 50^; 12 S. F. eggs, 24^; 5 gal. K. oil at 13^. 

No. 7 Mrs. F. Gilford, #44 Brown St., 12 S. F. eggs, 24j£; 2 lb. butter at 26j£; 1 pk. 

potatoes, 15^; 1 head cabbage, 6^; 2 bunches beets at 5; 1 lb. lard, 15£; 5 cakes laundry 
soap at 5^; 5 lb. rice at 10^; 1 gal. molasses, 60^. 

No. 8 Edward L. Corey, #54 Brown St., 1 broom, 35^; % gal. maple sirup at $1.25; 
1 can tomatoes, 10^; 1 bu. potatoes, 60^; 1 bbl. apples, $2. 

No. 9 Mrs. A. Waldron, #82 Chestnut St., 2 lb. butter at 26^; 1 lb. cheese, 16j£; 1 
sack pastry flour, $1.50; 1 lb. lard, 15^; 12 S. F. eggs, 26^; 1 pkg. H. O. pancake, 10j£; 1 qt. 
maple sirup, 35^. 

No. 10 P. J. McGuire, Cottage Hotel, #52 Ann St., 1 lb. M, & J. coffee, 32^; 1 wash¬ 
board, 50^; 1 lb. raisins, 10f£; 1 bottle bluing, 10j£; 1 broom, 30^; 1 pkg. rolled oats, 13^; 
12 oranges, 35^. 


ADVANCED COURSE 


167 


The amount of cash sales, as shown by the cash tickets handed in by the salesmen and 
the customers, is $121.45. Enter this amount in the cash book, on the debit side, with the 
explanation, Cash sales , as per tickets. 

Enter the total of each customer’s sales slip against the customer’s name on an abstract 
sales sheet, dated Oct. 1, and numbered 1 : also enter the total cash sales underneath, and 
carry these amounts to the proper columns of the abstract sales book. (See models, pages 
158 and 159.) File the abstract sales sheets in numeric order in your large envelope. 

Paid cash as follows: Books and stationery, $6.25; postage stamps, $1; one month’s 
rent in advance, $50; merchandise purchased of Gray Bros., $15.50; merchandise purchased 
of Williams & Andrews, $30. Enter in the cash book. 

Balance your cash book, entering the difference in red ink on the credit side. Bring 
down the balance on the left-hand, or debit, side, in the second column, under date of Oct. 8. 
In this series of transactions the cash book will be balanced at the close of each day’s business, 
in accordance with the custom in actual retail business. 


October 8, 19 — 

Purchased of S. M. Crockett & Co., City, on account, 30 days, 3% 10 ds., 5 doz. tomato 
ketchup at $1.50; 1 gro. bluing, $7.50; 3 doz. brooms at $2. 

Purchased of Gray Bros., for cash, 50 heads cabbage at 40; 60 bunches beets at 20. 
Bought, for cash, from wagons, 20 doz. S. F. eggs at 200; 60 lb. cream cheese at 120. 

The following sales slips have been handed in by the salesmen. 

No. 1 Mrs. S. T. Worthen, 10 lb. G. sugar at 6§0; 1 bottle bluing, 100; 2 lb. cheese 
at 160; 1 lb. Y. H. tea, 500. 

No. 2 Wm. Harper, 1 lb. M. & J. coffee, 320; 1 bbl. N. S. flour, $5.75; 2 qt. molasses 
at 12§0; 5 cakes laundry soap at 50. 

No. 3 A. B. Ryder, 101b. G. sugar at 6^0; 1 pkg. R. oats, 120; 1 pk. potatoes, 150; 

5 gal. K. oil at 130; 5 lb. lard at 120. 

No. 4 Mrs. F. Gilford, 10 lb. G. sugar at 6J0; 1 lb. M. & J. coffee, 320; li lb. cheese 
at 160; 1 sack flour, $1.50; 1 can corn, 100; 1 can tomatoes, 100; 1 broom, 350. 

No. 5 E. B. Woods, #44 Laurel St., 2 lb. print butter at 300; 1 bu. potatoes, 600; 1 pk. 
apples, 200; 12 bananas, 200; 5 lb. G. sugar at 6§0; 1 lamp chimney, 100; 1 bbl. N. S. flour, 

$5.75. 

No. 6 Edward Austin, 10 lb. tub butter at 240; 1 lb. M. & J. coffee, 320; 5 lb. lard at 
120; 1 broom, 350; 10 lb. G. sugar at 6 £0; 3 lb. codfish at 150. 

No. 7 Mrs. A. Waldron, 1 bbl. apples, $2.25; 10 lb. lard at 120; 10 lb. sugar at 6|0; 
2 lb. Rio coffee at 200; 1 lb. Y. H. tea, 500. 

No. 8 C. H. Stratton, Elm House, 10 bu. potatoes at 550; 1 hf. cht., 50 lb., E. B. tea 
at 500; 1 bale, 125 lb., M. & J. coffee at 300; 5 doz. S. F. eggs at 220; 1 case corn flakes, 36 
pkg., $4.50; 1 bbl. oatmeal, $4.75; 1 bx. prunes, 50 lb., $6. 

No. 9 Chas. A. Dodge, #57 Chestnut St., 1 lb. E. B. tea, 600; 1 lb. M. & J. coffee, 320; 

6 lemons, 180; 12 S. F. eggs, 240; 1 bbl. flour, $5.75; 5 lb. lard at 120. 

No. 10 P. J. McGuire, Cottage Hotel, 1 gal. vinegar, 250; 1 bbl. N. S. flour, ^5.75; 
5 lb. butter at 240; 2 cans C. milk at 150; 1 bottle O. oil, 750; 1 bunch celery, 150; 1 can 
chicken, 400. 

Cash sales for the day, per cash tickets, $214.12. (Abstract sales sheet and cash book.) 

Do not forget to make proper entries on a daily abstract sales sheet (No. 2), and also in 
the abstract sales book. Number the abstract sales sheets consecutively. 


168 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Received cash from customers as follows: Mrs. F. Gilford, $21.39; P. J. McGuire, $50; 
Wm. Harper, $18.49; Mrs. Wm. Hanson, $20. 

Deposit $550 in City Bank. 

In this set you will not be required to use a check book, but will keep an account with 
the bank on last pages of your Blank No. 1. Head these pages, Account with City Bank. Write 
the date the same as in the cash book; in the first explanation space write Deposit; in the 
second explanation space, Currency; in the first money column the amount, $550. When a 
check is called for in the transactions, write the date, the name of the party to whom the check 
is given in the first explanation space, for what given in the second explanation space, and 
carry the amount into the second, or right-hand money column. The difference at any time 
between the two money columns will show the amount of cash in bank. 

Paid cash as follows: (Checks) Hackett Bros., invoice of Oct. 1, less 2% (enter in cash 
book, purchases journal, and bank account. See model of purchases journal, page 159); E. J. 
Dunn Grocery Co., invoice of Oct. 1, less 5%. (Currency) Gray Bros., invoice of even date, 
$3.20; merchandise purchased from market wagons, $11.20; salaries, Stuart, $12; Canfield, 
$12 ; Marsh, $20; freight, $3.42. 

Balance your cash book, and bring down the amount the same as in double entry. 

October 15, 19 — 

Bought of Park & Tilford, New York, net 2 mos., 3/10, merchandise as per invoice, $287.90. 

Bought of S. S. Pierce k Co., Boston, net 2 mos., 2/10, merchandise as per invoice, $468.32. 

Purchased of St. Louis Milling Co., St. Louis, net 4 mos., 5/10, merchandise as per invoice, 
$450. 

Purchased of Gray Bros., City, for cash, 50 heads cabbage at 40; 1 bu. turnips, 450; 80 
bbl. apples at $2. 

Purchased of Trent Commission Co., City, for cash, 4 tubs C. butter, 200 lb. at 170; 
10 baskets late peaches at 650. 

The following sales slips have been handed in by the salesmen. 

No. 1 C. H. Stratton, Elm House, 1 pail mackerel, 20 lb., $4.25; 1 tub lard, 60 lb., at 
100; 1 doz. tomato ketchup, $2.25; 6 doz. S. F. eggs at 220; 4 sacks pastry flour at $1.50; 
1 bbl. N. S. flour, $5.50. 

No. 2 Mrs. S. T. Worthen, 1 bbl. apples, $2.50; 1 bu. potatoes, 600; 5 lb. butter at 250; 
12 S. F. eggs, 240; 1 lb. M. k J. coffee, 320. 

No. 3 Mr. Wm. Harper, 20 lb. G. sugar at 6|0; 10 lb. lard at 120; 3 cans corn at 100; 
1 lb. E. B. tea, 600; 4 lb. raisins at 150; 1 broom, 350. 

No. 4 E. L. Corey, 1 bbl. flour, $5.75; 10 lb. tub butter at 240; \ lb. pepper at 400; 1 
box sardines, 350; 12 pickles, 150. 

No. 5 P. J. McGuire, Cottage Hotel, 1 case, 36 cans, tomatoes at 80; 1 case, 36 cans, 
corn at 80; 1 tub lard, 40 lbs., at 110; 1 bbl., 212 lb., sugar at 60; 3 doz. lemons at 250. 

No. 6 E. B. Woods, 1 bbl. apples, $2.50; 1 lb. E. B. tea, 600; 1 lb. M. k J. coffee, 320; 
5 lb. print butter at 300; 1 clothesline, 300. 

No. 7 Chas. A. Dodge, 20 lb. tub butter at 240; 1 bu. potatoes, 600; 1 sack pastry flour, 
$1.50; 1 gal. M. sirup, $1.25; 1 jug, 150. 

No. 8 Mrs. F. Gilford, 1 bu. potatoes, 600; 2 pkg. shredded wheat biscuit at 12J0; 10 

lb. tub butter at 240; 1 ham, 12 lb., at 12J0; 12 S. F. eggs, 250. 

No. 9 Mrs. A. Waldron, 1 bbl. N. S. flour, $5.75; 5 lb. tub butter at 240; 1 lb. E. B. 

tea, 600; 1 broom, 350; 1 pkg. gelatine, 150; 1 pkg. Cream of Wheat, 150. 



ADVANCED COURSE 169 

No. 10 Edward Austin, 12 S. F. eggs, 250; 1 bbl. apples, $2.25; 1 bu. potatoes, 600; 
1 can salmon, 240; 1 bottle O. oil, 350; 1 head lettuce, 50. 

No. 11 Mrs. Wm. Hanson, 1 bbl. N. S. flour, $5.75; 1 bu. potatoes, 600; 20 lb. G. sugar 
at 6^0; \ cht., 18 lb., Y. H. tea at 450. 

No. 12 A. B. Ryder, 1 bbl. N. S. flour, $5.75; 1 bu. potatoes, 600; 1 bbl. apples, $2.25; 
1 bottle ketchup, 220; 1 qt. beans, 100; 1 lb. pork, 120. 

Cash sales for the day, per cash tickets, $184.96. 

Received cash from customers as follows: Mrs. S. T. Worthen, Sept, account, $23.45; 
A. B. Ryder, $44.28; Wm. Harper, $20; Edward Austin, $28.74; E. L. Corey, $18.96; Mrs. 
Wm. Hanson, $11.42. 

Received of C. H. Stratton his note at 4 mos., with interest, for $212.40, to balance his 
account to Oct. 1st. (Enter in journal and notes receivable book.) 

Had your note, dated to-day, at 90 days for $ 100, and indorsed by your teacher, discounted 
at the City Bank, and received credit for the net proceeds. 

Deposited $125. 

Paid cash as follows: (Checks) second-hand safe, purchased of Diebold Safe Co., $100; 
S. M. Crockett & Co., invoice of 8th inst., less 3%; American Sugar Refining Co., invoice of 
Oct. 1, less 1%; Gray Bros., invoice of even date, $162.45; Trent Commission Co., invoice 
of even date, $40.50. (Currency) office desk and fixtures, $30; salaries, Stuart, $12; Marsh, 
$20; Canfield, $12; freight, $57.42. 

(Student) drew cash for private use, $50. 

Remember to balance your cash book. 

October 22, 19— 

Purchased of Gray Bros., City, for cash, 10 bbls. apples at $2; 50 bu. potatoes at 450; 
30 doz. case eggs at 150. 

Bought for cash, from market wagons, 40 doz. S. F. eggs at 220; 50 hd. cabbage at 50; 
400 lb. squash at 10. 

Bought of American Sugar Refining Co., 30 ds., 1/10, merchandise as per invoice, $124.72. 
Bought of S. S. Pierce & Co., Boston, net 60, 3/10, merchandise as per invoice, $468.75. 
Purchased of F. H. Leggett & Co., New York, net 60, 3/10, merchandise as per invoice, 

$344.70. 

The following sales slips have been handed in by the salesmen. 

No. 1 A. B. Ryder, 1 pail mackerel, 20 lb., $3.75; 1 sack pastry flour, $1.50; 12 S. F. 
eggs, 250; 1 box cigars, $5.50; 5 lb. coffee at 300; 12 oranges, 350. 

No. 2 Mrs. Wm. Hanson, 1 bx., 5 lb., codfish at 120; 1 ham, 18 lb., at 12§0; 1 case C. 
corn, 36 cans, at 80; 1 case C. tomatoes, 36 cans, at 80; 4 sacks pastry flour at $1.50; 2 brooms 
at 300. 

No. 3 Edward Austin, 1 ham, 12 lb., at 12J0; 12 eggs, 250; 10 lb. G. sugar at 6J0; 2 
lb. coffee at 320; 1 sack pastry flour, $1.50; 1 bottle bluing, 100; 1 can chicken, 400. 

No. 4 Mrs. A. Waldron, 1 can chicken, 400 ; 1 bunch celery, 150 ; 1 bottle O. oil, 750 ; 
1 5-lb. can coffee, $1.50; 1 lamp, 500; 5 gal. K. oil at 130; 1 clothesline, 300. 

No. 5 Mrs. F. Gilford, 1 bbl. N. S. flour, $5.75 ; 1 can tongue, 750 ; 5 bars laundry soap 
at 50; 1 bottle ketchup, 220; 10 lb. G. sugar at 6f 0. 

No. 6 Chas. A. Dodge, 5 lb. lard at 120; 1 ham, 15 lb., at 12|0; 5 gal. K. oil at 130; 
1 box cigars, $2.50; 1 broom, 350; 12 eggs, 250; 12 bananas, 250. 

No. 7 Mrs. S. T. Worthen, 1 cake Sapolio, 100 ; 2 lb. coffee at 320 ; 5 lb. lard at 120 ; 
1 bbl. N. S. flour, $5.75; 12 bananas, 250. 


170 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 8 C. H. Stratton, Elm House, 500 cigars at $35 per M. ; 200 cigars at $55 per M.; 
1 ham, 26 lb., at 120; 1 bbl. N. S. flour, $5.50; 6 doz. S. F. eggs at 220; 20 doz. case eggs 
at 160; 1 tub butter, 52 lb., at 220; 1 bbl. G. sugar, 216 lb., at 60; J cht. Y. H. tea, 60 lb., 
at 40^. 

No. 9 Wm. Harper, 1 sack pastry flour, S1.50; 10 lb. tub butter at 24^; 2 lb. cheese 
at 16^; 5 gal. K. oil at 13^; 1 bbl. apples, $2.50; 12 oranges, 35j£. 

No. 10 E. L. Corey, 1 ham, 16 lb., at 12£0; 20 lb. G. sugar at 610; 1 lamp, 400; 1 5-lb. 
can coffee, $1.50; 3 gal. K. oil at 15^. 

No. 11 P. J. McGuire, Cottage Hotel, 200 cigars at $35 per M.; 1 bbl. N. S. flour, $5.50; 
1 doz. T. ketchup, $2; 1 tub butter, 50 lb., at 22j£; \ cht. Y. H. tea, 60 lb., at 40^; 5 gal. K. 
oil at 13^; 1 lb. baking powder, 50^. 

No. 12 E. B. Woods, 1 sack pastry flour, $1.50; 2 lb. Rio coffee at 20^; 5 lb. lard at 12^; 
1 lb. chocolate, 30j£; 1 can tongue, 75^; 1 bottle Worcestershire, 40^; 1 pail mackerel, 10 lb., 
$2.25. 

Cash sales for the day, per cash tickets, $242.36. 

Received cash from customers as follows: P. J. McGuire, $50; Mrs. A. Waldron, $20. 

Had your note at 4 mos. for $500 discounted at the City Bank, and received credit for 
the net proceeds. 

Deposited $225. 

Paid cash as follows: (Checks) Park & Tilford, invoice of 15th inst., $287.90, less 3% 
St. Louis Milling Co., invoice of 15th, $450, less 5%. (Currency) Gray Bros., $47; goods 
from market wagons, $15.30; freight and cartage, $11.32; salaries, Canfield, $12; Stuart, 
$12; Marsh, $20. 

October 29, 19— 

Is your cash book balanced ? 

Purchased of Williams & Andrews, City, for cash, 2 bx. oranges at $3.50; 2 bx. lemons 
at $3; 4 tubs Cr. butter, 240 lb., at 19j£; 5 bx. cheese, 252 lb., at 11^. 

Purchased of Cobb, Bates & Yerxa, Boston, subject to sight draft in 10 days, merchandise 
as per invoice, $262.74. 

Bought of Park & Tilford, New York, net 60, 2/10, merchandise as per invoice, $68.74. 

Bought of F. H. Leggett & Co., New York, net 4 mos., 3/10, merchandise as per in¬ 
voice, $168.94. 

Purchased of S. S. Pierce & Co., Boston, net 60, 3/10, merchandise as per invoice, $88.45. 

Purchased, for cash, country produce amounting to $16.42. 

The following sales slips have been handed in by the salesmen. 

No. 1 E. B. Woods, 20 lb. tub butter at 22<£; 15 lb. G. sugar at 6J^; 5 gal. K. oil at 13^ * 
J cht. Y. H. tea, 15 lb., at 40^; 1 lb. baking powder, 50^. 

No. 2 P. J. McGuire, Cottage Hotel, 2 hams, 47 lb., at 12^; 1 bbl. oatmeal, $4.75; 1 
■case Cr. of Wheat, 36 pkg., at 12§f£; 6 brooms at 25j£; 6 doz. oranges at 25^; 3 doz. lemons 
at 20^. 

No. 3 E. L. Corey, 1 gal. maple sirup, $1.25; 5 bu. potatoes at 60^; 1 broom, 35£; 1 
can ox tongue, 75f£; 1 bx. mustard, 15^. 

No. 4 Wm. Harper, 1 ham, 18 lb., at 12^ ; 3 cans peaches, 50£ ; 5 lb. coffee at 30^ ; 
10 lb. G. sugar at 6 ; 1 bx. gelatine, 15^; 12 oranges, 35^. 

No. 5 C. H. Stratton, Elm House, 1 tub lard, 54 lb., at 10^ ; 20 lb. print butter at 23j£ ; 
10 doz. S. F. eggs at 24^; 1 case wheatena, 36 pkg., at 12^; 12 bx. sardines at 25^; 1 bx. 
lemons, $4.50; 1 bbl. pastry flour, $6; 1 ham, 24 lb., at 12^; f cht. E. B. tea, 15 lb., at 50^, 


ADVANCED COURSE 171 

No. 6 Mrs. S. T. Worthen, 20 lb. G. sugar at 6§f£; 5 lb. Y. H. tea at ; 1 can ox tongue, 
75£; 6 lemons, 15^; 5 gal. K. oil at 13£. 

No. 7 A. B. Ryder, £ cht. E. B. tea, 15 lb., at 50£ ; 1 bu. potatoes, 60^ ; 12 S. F. eggs, 

; 1 lamp chimney, 10£; 1 can tomatoes, 10^; 1 ham, 14 lb., at 12|£. 

No. 8 Mrs. Wm. Hanson, 1 bbl. N. S. flour, $5.75; 25 lb. oatmeal at 5£; 1 pail mackerel, 
10 lb., $2.25; 1 bbl. apples, $2.50; 20 lb. G. sugar at 6£f£; 5 gal. K. oil at 13^. 

No. 9 Edward Austin, 12 S. F. eggs, 26^ ; 5 lb. E. B. tea at 50£ ; 10 lb. tub butter at 
22^ ; 1 bx. mustard, 15^; 2 cans corn at 10£. 

No. 10 Mrs. A. Waldron, 3 lb. print butter at 26^; 1 sack pastry flour, $1.50; 1 ham, 
12 lb., at 12f ^; 10 lb. G. sugar at 6; 1 gal. molasses, 40j£; 1 lb. baking powder, 50^. 

No. 11 Mrs. F. Gilford, 5 gal. K. oil at 13^; 1 bbl. apples, $2.75; 5 lb. coffee at 30£; 
1 lamp, 35^; 1 broom, 30^; J gr. matches, 25fL 

No. 12 Chas. A. Dodge, 12 S. F. eggs, 26^; 1 lb. coffee, 32$6; 1 bbl. apples, $2.50; 
1 wash tub, $1.10; 1 lb. chocolate, 30j£. 

Cash sales for the day, per cash tickets, $216.48. 

Received cash as follows: P. J. McGuire, $50; Mrs. A. Waldron, $10. 

Deposited $150. 

Paid cash as follows : (Checks) Williams & Andrews, invoice of even date, $86.32; 5 tons 
coal, $25. (Currency) salaries, Canfield, $12; Stuart, $12; Marsh, $20; country produce, 
$16.42; freight, $4.88. 

Gave S. S. Pierce & Co., Boston, your note at 20 days, dated Oct. 25th, with interest, 
for amount of invoice of Oct. 15th, less 2%. 

Posting. — You will now post your books. Remember that in single-entry you post only 
such transactions as affect personal accounts, and that only personal accounts appear in either 
the general ledger or the card ledger. 

The card ledger debits will be taken entirely from the statement sheets. Remove these 
statements from the file, and post only the totals to the corresponding cards of the card ledger, 
placing the date of each sale in the explanation space. (See model ledger card, page 164.) 
Remember to keep your card ledger in alphabetical order. 

The card ledger credits will be found on the debit side of the cash book and in the journal. 
Turn to your cash book and post all cash entries which affect the accounts of persons whose 
names appear in the card ledger. (See form, page 164.) Place a check mark against each 
name in the cash book. Turn to your journal and post any items which may affect customers’ 
accounts, placing a check mark against each item to indicate posting. 

Your own account and the accounts with those business concerns of whom you purchase 
goods will be kept in the general ledger, and the postings to these accounts will be made 
from the journal, purchases journal, and the cash book. Open these accounts in your general 
ledger (Blank No. 2). Allow one third of a page to each account, beginning on page 3 of the 
blank. Use the first page of the blank for an alphabetical index to your general ledger. Index 
an account immediately after it is opened. 

Post from purchases journal the amount of each invoice of goods bought on account, to 
the credit of the account named; then post from the journal and the cash book such items 
as should be carried to these accounts. Place a check mark against each cash item. See 
explanation of cash book, page 162. 

Foot and rule the purchases journal'and the abstract sales book. 

Having completed your posting, prove the same (see Proof of Posting, page 155). 


172 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Statement of Resources and Liabilities 
Henry T. Brown, October 31, 19— 


Resources 

Cash, balance on hand 
Merchandise, per inventory 
Furniture and fixtures 
Notes receivable, per notes receivable 1 
Accounts receivable, per card ledger 
Total resources 

Liabilities 

Notes payable, per notes payable book 
Accounts payable, per general ledger 
Total liabilities 
Present Worth 


Schedule of Accounts Receivable 
October 31, 19— 


Mrs. S. T. Wood 

25.10 

H. B. Runyon 

36.25 

John Stratton 

114.87 

Mrs. Wm. Howard 

175.23 

Wm. Harper 

212.15 

Chas. Kennedy 

25.20 

Edward L. Corlis 

13.10 

Mrs. A. Wallace 

45.12 

P. J. McGuire 

26.30 

Mrs. Fred Young 

52.10 

E. B. Woodruff 

29.75 

Charles Doyle 

18.50 

Total 


Schedule of Accounts Payable 

October 31, 

19— 

Adams & Hackland 

482.35 

American Sugar Refining Co. 

216.20 

Park & Tilford 

75.68 

J. J. Powers Co. 

517.22 

F. H. Leggett & Co. 

351.46 

Cobb, Bates & Young 

162.47 


Total 1805.38 

Make an abstract of your card ledger on a sheet of paper, showing the amount due from 
each customer, and total amount due. 

From your notes receivable book find the amount of the notes receivable in your possession, 
and from your cash book find the amount of cash on hand and in bank. 

From your general ledger find the amount due your creditors, and from your notes payable 
book the amount of notes you have outstanding. Balance your bank account. 

Your inventory shows the following: 

Merchandise on hand, valued at $4400.63, 

Furniture and fixtures, ” ” 125. 

From this data prepare a statement of resources and liabilities, using the above model. 
Find the net gain or the net loss according to the form for proprietor’s statement on page 173, 


book 


253 

3491 

250 

197 

773 


985 

1805 


4965 


2791 


82 


33 


2174 


49 





















ADVANCED COURSE 17* 

Proprietor’s Statement 
October 31, 19— 

Henry T. Brown, invested 

withdrew 

“ net investment 

present worth 

Net Loss 


2500 

250 


2250 

2174 

49 



75 

51 



1 


Carry the net loss shown in your proprietor’s statement to the debit side of the proprietor’s 
account in the ledger, and close the account in the same way as in double entry, bringing the 
balance down under the date Nov. 1. 

CONTROLLING ACCOUNTS AND SUBSIDIARY LEDGERS 

The student will remember that in the elementary work the Journal was first used as a 
book in which all transactions were recorded, and that later on in the work, special journals 
were introduced, in which transactions of certain classes were recorded; i.e., cash, sales, and 
purchase journals. 

Similarly the Ledger has been used up to this time for all accounts, but whenever accounts 
of one class become sufficiently numerous the ledger may be subdivided in the same manner 
as the journal. This is accomplished by removing the accounts of a certain class from the 
general ledger and placing them in a separate or subsidiary ledger. 

This of course will upset the balance of the general ledger, and in order to restore this 
equality of debits and credits an account is opened with the subsidiary ledger. 

This account in the general ledger, which serves as a substitute for the accounts in the 
subsidiary ledger, is called a Controlling account. 

The balance of this account must at all times be kept in agreement with the sum of all the 
balances of the accounts in the subsidiary ledger. 

All debits and credits which are posted to the subsidiary ledger daily are posted to the 
controlling account in aggregate at the end of the month. Each debit or credit to the subsidiary 
ledger accounts must be posted twice, once to the individual account in the subsidiary ledger 
and once to the controlling account in the general ledger. To save labor in posting, special 
columns are provided so that the postings to the controlling account are made in the total only, 
at the end of the month. 

The bookkeeper is thus able to take a trial balance from the general ledger independently 
of the subsidiary ledger. 

Your card ledger in this set is a subsidiary ledger and the controlling account is Accounts 
Receivable. The accounts of trade creditors will also be taken out of the general ledger and 
will be operated in a separate book called the purchases ledger. The creditors’ controlling 
account in the general ledger will be called Accounts Payable. 

The following short exercise will serve to illustrate the principles of controlling 

accounts. 

Short exercise illustrating controlling accounts: 

October 1 Wm. P. Daniels begins business, investing cash $2000, merchandise $2500, 
store building $4000, office equipment $500. 

2 Sell Wm. Howard on account mdse. $154. 



















174 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


3 

4 

5 

6 

7 

8 
9 

10 

11 

12 

13 

14 

15 

16 


Sell C. T. Young on account mdse. $106.40. 

Purchased of Stratton & Walsh mdse, on account $250. 
Purchased of Bruce & Co. mdse, on account $400. 

Sell J. T. Powers mdse, on account $258. 

Sell G. F. Kennedy mdse, on account $365.45. 

Sell H. M. Adams mdse, on account $112.50. 

Sell J. D. White mdse, on account $116.95. 

Pay salaries to date $250. 

Pay electric light bill $10.50. 

Received cash from Wm. Howard in full $154. 
Purchased of Scott & Co. mdse, on account $150. 

Pay Bruce & Co. cash on account $200. 

Receive of G. F. Kennedy cash on account $200. 
Receive of H. M. Adams cash on account $50. 


In recording the above transactions use a general ledger, sales ledger, and purchases ledger. 
Allow six accounts to the page in the ledgers. This exercise is not to be written in the grocery 
blanks, but on loose ledger and journal sheets. 


RETAIL GROCERY BUSINESS — Continued 

PRELIMINARY WORK — ADMISSION OF PARTNER AND CHANGE TO 

DOUBLE ENTRY 


November 1, 19— 

The business of the past month has shown a small loss, but as the sales are increasing, 
you have decided to continue the business and take a partner, J. M. Marsh, your present 
delivery clerk, and also to install a department of meat, fish, and poultry in addition to your 
grocery business. 

You have decided to keep the books by double entry and to put them into double entry 
form before forming the partnership. 

Changing from Single Entry to Double Entry. — To change a set of books from single entry 

to double entry it is only necessary to open such new accounts in the ledger as shall cause 
it to exhibit all the resources and liabilities of the business as are shown by the statement of 
resources and liabilities. 

November 1, 19— 



Cash 

per cash book 

315 

26 




Purchases 

per inventory 

4837 

63 




Furniture and Fixtures 

valued at 

275 





Notes Receivable 

per notes receivable book 

182 

31 




Accounts Receivable 

per card ledger 

489 

25 




Notes Payable 

per notes payable book 



1085 

75 

V 

Accounts Payable 

per general ledger 



2965 

87 

V 

John D. Bruce 

present worth 



2047 

83 


This entry made to change books 

from single entry to double entry 





















ADVANCED COURSE 


175 


From your statement of resources and liabilities of October 31 make an entry in the jour¬ 
nal, similar to an opening entry, according to the model on page 174. 

In posting the opening entry check but do not post the personal accounts payable and the 
proprietor’s account, as these items are already in the general ledger. All other accounts in 
the opening entry should be posted. 

Allow one third of a page for each account. 

The debits and credits should now be equal, and to prove this you should take a trial 
balance. You are now ready to proceed with double entry. The journal and cash book are 
to be kept as in earlier work in double entry. In order to ascertain the amount of the total 
purchases and sales for each month, the footing of the Amount of Invoice column of the pur¬ 
chases journal should be posted to the debit of Purchases at the end of the month, as it shows 
all purchases of merchandise; and the footing of the Monthly Sales column of the abstract sales 
book should be posted to the credit of Sales, as it shows all the sales of Anerchandise. 

By agreement with J. M. Marsh, your partner, the new firm takes over all the resources 
and assumes all the liabilities of your present business, and Marsh invests property of equal 
value as described on the following page. 

Articles of copartnership have been drawn up by your attorney and executed by you 
and your partner, showing the investment of each partner, and containing the following condi¬ 
tions : 

You (Student) shall act as bookkeeper and cashier, and shall have general charge of the 
inside management of the store; shall receive all cash, sign all notes, checks, and other negotiable 
instruments of the firm, and attend to the purchase of all groceries. 

J. M. Marsh shall have charge of the delivery of goods, the taking of orders, with such 
assistance as may be necessary, and shall attend to the buying of all country produce and pro¬ 
visions. 

Each partner shall give his entire time to the business, and shall be entitled to draw, for 
living expenses, cash not to exceed $100 per month, or its equivalent in goods from the store 
at cost. 

The profits and losses of the business shall be divided equally at the end of each year, 
or at such period as the books may be closed. 

A bill of sale has been drawn up by your attorney and executed by you, disposing of your 
entire resources to the firm of (Student) & Marsh, subject to the payment of your liabilities 
as shown by your statement of October 31. This bill of sale represents your investment in 
the new firm. 

The' firm of (Student) & Marsh will continue to use the same set of books as were pre¬ 
viously used in the business, and the ledger already contains the accounts representing your 
investment. 

You should now make the proper entries for the investment of J. M. Marsh, which the 
firm receives from him as follows: 

Note in his favor, dated Sept. 4, at four months from date, signed by Edward W. Law¬ 
rence, indorsed by E. W. Lynch. Face of note, $942.68; discount for unexpired time, 

$10.06. 

Note in his favor, dated Sept. 19, at four months, with interest, signed by George M. 
Kelly, indorsed by Wm. H. Kelly & Co. Face of note, $622.85; interest due on note to date, 

$4.46. 

Horse, wagon, and harness,, now used for delivering goods, valued at $250. 

Cash $578.37, which is the balance necessary to make his investment equal your own 
present worth, as shown by your statement of October 31. 


176 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Following are model forms for the necessary journal and cash book entries. 



John D. Bruce and Arthur Lyma 

1 

n have this day formed a partner- 





ship under the firm name of Bruce 

& Lyman, to take over and con¬ 





tinue the business heretofore con 

ducted by said John D. Bruce. 





The investment of Bruce is rep 

resented by the resources of his 





former business which he has 

transferred to the firm, less his lia- 





bilities which are assumed by the 

firm, as shown by above entry. 





The investment of Lyman is rep 

resented by the following entry : 





Notes Receivable 

per notes receivable book 

500 




Interest 

on above 

3 

75 



Horses and Wagons 

valued at 

225 



V 

Cash 

per cash book 

1321 

58 



Discount 

on notes receivable 



2 


Arthur Lyman 

net investment 



2047 



You are now ready to proceed with the second month’s work in the retail grocery business. 
You should at this point transfer the accounts of creditors from the general ledger to the pur¬ 
chases ledger. This may be done by entering the balance of each creditor’s account on the 
smaller side of such account, together with the date, Nov. 1, and the explanation in the wide 
column, “ Purchases ledger, page —,” adding the page of that ledger to which the balance 
is transferred. The explanation in the purchases ledger should be, “ General ledger, page —,” 
adding the page of the general ledger from which the balance has been transferred. 

The following Expense accounts will be used in this set: Salaries, Office Supplies, Stable 
Expense, Insurance, General Expense. A Freight-In account will also be kept. 


TRANSACTIONS 

November 1, 19— 

Engaged Geo. Carter as meat cutter, at $15 per week, and Willis Holt as driver and order 
clerk, at $15 per week. 

Purchased of Armour & Co., Chicago, 30 ds., 2/10, dressed meat, as per invoice, 
$132.21. 

Purchased of Swift & Co., Chicago, 30 ds., 2/10, beef, mutton, and lard, as per invoice, 
$142.38. 

Bought of Gray Bros., City, for cash, 5 tubs butter, 212J lb., at 20^; 2 bx. cheese, 104 
lb., at 11^. 

Bought of E. J. Dunn Grocery Co., City, 4 mos., 5/10, 2 hf. cht. Japan tea, 120 lb., at 
25^; 2 hf. cht. E. B. tea, 120 lb., at 32^; 2 bales Mocha coffee, 300 lb., at 25 £; 2 mats Java 
coffee, 150 lb., at 26^; 1 pail cinnamon, 25 lb., at 25^. 

Purchased of M. S. Newton & Sons, Boston, 30 ds., 2/10, fish, as per invoice, $18.39. 

Bought country produce from market wagons, for cash, $18.44. 



























ADVANCED COURSE 


177 


The following sales slips have been handed in by the salesmen. 

No. 1 Chas. A. Dodge, 8 lb. rib roast at 160; 20 lb. G. sugar at 6§0; 12 lemons, 250; 
1 bl. Graham flour, $5.25; 1 bx. macaroni, 350; 1 bottle Worcestershire, 400. 

No. 2 Thomas B. Tucker, Tucker’s Tavern, 10 lb. porterhouse at 220; 6 lb. lamb chops 
at 160; 22 lb. ham at 120; 6 doz. S. F. eggs at 250; 12 lb. fish at 100; 5 bu. potatoes at 600; 
1 case wheatena, 36 pkg., at 120. 

No. 3 Mrs. Fred Gilford, 7 lb. pork roast at 120 ; 20 lb. tub butter at 240 ; 1 sack Graham 
flour, $1.25 ; § lb. cinnamon at 500; § bu. beans at $3 ; 1 bottle T. ketchup, 220. 

No. 4 E. B. Woods, 12 lb. turkey at 180; 1 qt. oysters, 400; 1 can Java coffee, 10 lb., at 
300; 1 gal. molasses, 500; 1 lb. cocoa, 550; 3 doz. S. F. eggs at 280. 

No. 5 Mrs. Wm. Hanson, 1 tub butter, 42 lb., at 220; 4 doz. S. F. eggs at 280; 8 lb. 
pork roast at 150; 10 lb. beef roast at 160; 5 lb. round steak at 140; 5 lb. Java coffee at 300; 
1 case C. peas, 36 cans, at 120. 

No. 6 Wm. Harper, 7 lb. lamb at 160 ; 5 bu. potatoes at 600 ; 1 sack Graham flour, 
$1.25; 1 gal. maple sirup, $1.25; 5 lb. print butter at 280; 1 bottle capers, 300. 

No. 7 E. L. Corey, 8 lb. corned beef at 120 ; 20 lb. tub butter at 240 ; 1 sack pastry 
flour, $1.50; 1 bx., 12 lb., prunes, at 120; 1 lb. baking powder, 500; 1 hd. cabbage, 100. 

No. 8 James B. Longley, Star Restaurant, 10 lb. sirloin steak at 180 ; 12 lb. porter¬ 
house steak at 200; 1 ham, 24 lb., at 120; 6 doz. S. F. eggs at 250; 1 doz. T. ketchup, $2.25; 
1 doz. Crown olives, $3; 18 lb. turkey at 160. 

No. 9 A. B. Ryder, 6 lb. veal roast at 180 ; 1 qt. oysters, 400 ; 3 bu. potatoes at 600 ; 
20 lb. G. sugar at 6|0; 1 sack buckwheat flour, $1; 1 gal. maple sirup, $1.25; 1 lb. baking 
powder, 500. 

No. 10 C. H. Stratton, 20 lb. sirloin steak at 150; 12 lb. porterhouse at 180; 22 lb. sir¬ 
loin roast at 150; 10 lb. pork roast at 120; 39 lb. turkey at 150; 1 bbl. N. S. flour, $5.50; 
1 bbl. Graham flour, $4.75; 5 gal. maple sirup at $1.15; 1 sack buckwheat flour, $1; 1 hf. cht. 
Japan tea, 60 lb., at 350. 

No. 11 Mrs. S. T. Worthen, 1 pr. chickens, 9 lb., at 160; 1 bu. potatoes, 600; 24-lb. tub 
butter at 250; 1 lb. baking powder, 500. 

No. 12 P. J. McGuire, 10 lb. sirloin at 160; 5 doz. S. F. eggs at 280; 200 cigars at $35 
per M.; 100 cigars at $55 per M.; 15 lb. chicken at 150; 6 lb. ox tongue at 200. 

Enter the sales on customers’ monthly statement sheets exactly as in October. 

Cash sales for the day, per cash tickets, $321.45. 

Your cash book is now a special column double entry cash book, and you must always give 
the name of each account affected by any transaction, the same as in cash books which you 
used in previous double entry work. Where cash sales or purchases are made, place a check 
mark in the ledger folio column of the cash book opposite Sales and Purchases, as these amounts 
are posted to the Purchases and Sales accounts from the purchases journal, and from the abstract 
sales book, and not from the cash book. (See model form of cash book, pages 160 and 161.) 

Received cash as follows: Mrs. F. Gilford, payment of October account, $24.25; E. B. 
Woods, on account, $25; Mrs. A. Waldron, balance of September account, $9.48. 

Deposited $800. 

Paid cash as follows: (Checks) Adams & Hackland, on account, $100; American Sugar 
Refining Co., invoice of Oct. 22, less 1%; F. H. Leggett & Co., invoice of Oct. 22, less 3%; 
Gray Bros., City, invoice of even date, $53.94; Daniel Stoneglass, rent for November, $50. (Cur¬ 
rency) merchandise from the National Market Co., $18.44; stamps and postals, $2.50; re¬ 
placing broken window, $4.75; freight, $2.17; salaries, Canfield, $6; Stuart, $6. 


178 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


(Student) drew for private use, cash, $25. Marsh drew for private use, cash, $20. 

Gave S. S. Pierce & Co. note at 30 ds., with interest, to pay invoice of Oct. 22, loss 3%. 


November 8, 19 — 

Purchased of Hackett Bros., City, 60 ds., 2/10, 10 bbl. K. oil, 642 gal., at 9; 1 hhd. 
Golden Drip sirup, 96 gal., at 37jf£; 2 bbl. salt pork at $6.25. 

Bought of S. M. Crockett & Co., 60 ds., 3/10, 5 gross bluing at $7.25; 1 gross T. ketchup, 
144 bottles, at llj£; 36 one-gallon cans M. sirup at 95^. 

Bought of Gray Bros., City, net 30, 2/10, 5 cases eggs, 60 doz., at 15j£; 130 lb. turkey at 
13^; 65 lb. chicken at 12^. 

Bought produce of the National Market Co., for cash, $28.65. 

Purchased of American Sugar Refining Co., New York, net 30, 1/10, invoice amounting 
to $69.98. 

Bought of Armour & Co., Chicago, net 30, 2/10, invoice of pork and sausage, $98.37. 
Bought of Swift & Co., Chicago, net 30, 1/10, invoice of beef and mutton, $102.40. 
Purchased of M. Newton & Sons, Boston, net 30, 1/10, invoice of fish and oysters, $19.69. 
The following sales slips have been handed in by the salesmen. 

No. 1 E. L. Corey, 6 lb. chicken at 15j£; \ bbl. Graham flour at $5.50; 1 gal. maple 
sirup, $1.25; \ bu. beans, 80£; 5 gal. K. oil at 13^; 12 lb. G. sugar at 6J^; 1 gal. pickles, 
50£. 

No. 2 Wm. Harper, 10| lb. chicken at 16^; 1 bbl. pastry flour, $6; 2 doz. case eggs, 
at 22j£; 12 oranges, 35j£; 1 bottle extract vanilla, 40^; 2 pkg. shredded wheat, 25; 1 broom, 
35^. 

No. 3 Mrs. Wm. Hanson, 6 lb. pork chops at 12^ ; 8 lb. round steak at 14^ ; 12 lb. sir¬ 
loin roast at 15^; 11J lb. pork roast at 12^; 1 bbl. pastry flour, $6; 3 doz. bananas at 20^; 
1 gal. vinegar, 25^. 

No. 4 Mrs. S. T. Worthen, 8 lb. sirloin roast at 20^ ; | bbl. G. flour, $2.75 ; 12 S. F. 
eggs, 28^; 2 lb. cheese at 16^; 1 5-lb. can Java coffee, $1.50; 12 lemons, 25j£. 

No. 5 Edward Austin, 2 lb. round steak at 16^ ; 8 lb. corned beef at 12j£ ; 1 hd. cabbage, 
10^; 1 bu. potatoes, 60j£; | cht. E. B. tea, 15 lb., at 55j£; 1 bottle T. ketchup, 24^; 12 eggs, 
28 0. 

No. 6 Mrs. A. Waldron, 8 lb. lamb roast at 16^ ; 20 lb. G. sugar at 6 ; 5 lb. tub butter 
at 25^; 1 bbl. Graham flour, $5.25; 1 gal. pickles, 50^; 2 pkg. shredded wheat, 25^. 

No. 7 Chas. A. Dodge, 9 lb. turkey at 16^ ; 2 qt. cranberries at 10^ ; 1 bu. potatoes, 60^ ; 
12 case eggs, 22^; 1 box cigars, $5.50; 1 gal. vinegar, 25^. 

No. 8 James B. Longley, 1 sack buckwheat flour, $1.50; 1 gal. M. sirup, $1.25; 5 gal. 

S. pickles at 40^; 1 bbl. K. oil, 42 gal., at llj£; 20 lb. chicken at 14j£; 28 lb. rib roast at 14^; 
16 lb. pork roast at 11^; 15 lb. sir. roast at 15^; 17 lb. porterhouse at 18^. 

No. 9 Mrs. F. Gilford, 9| lb. turkey at 16£ ; 1 qt. oysters, 40^ ; 20 lb. G. sugar at 6^ ; 
1 bu. potatoes, 60^; 1 lb. baking powder, 50^; 12 oranges, 35^. 

No. 10 P. J. McGuire, 10 lb. sirloin roast at 16^; 20 lb. rib roast at 14^; 10 lb. pork 
roast at 12^; 16 lb. turkey at 16^; 1 bbl. N. S. flour, $5.50; 1 bbl. pastry flour, $5.75; 1 doz. 

T. ketchup, $2; 6 doz. oranges at 25 

No. 11 E. B. Woods, 11J lb. sirloin roast at 16^; 5 bu. E. R. potatoes at 55^; 1 bbl. 
apples, $2.75; 10 lb. lard at 12§j£; 20 lb. G. sugar at 6J^; 1 bottle bluing, 10^; \ bbl. G. flour 
at $5.50. 


ADVANCED COURSE 


179 


No. 12 Thomas B. Tucker, 12 doz. S. F. eggs at 260; 15 lb. sirloin steak at 160; 1 bbL 
N. S. flour, $5.50; 1 bbl. pastry flour, $5.75; 1 bbl. oatmeal, $5.25; 1 sack buckwheat, $1.50; 
5 gal. M. sirup at $1.15. 

No. 13 C. H. Stratton, 22 lb. porterhouse at 180; 31 lb. beef, sirloin, at 150; 26 lb. 
lamb at 150; 12 lb. pork chops at 100; 10 bu. potatoes at 550; 1 mat Java coffee, 75 lb., at 
280; 48 lb. butter at 250; 30 doz. case eggs at 180. 

Cash sales for the day, per cash tickets, $388.74. 

Received cash as follows: A. B. Ryder, October account, $38.30; Mrs. S. T. Worthen, 
on account, $15; P. J. McGuire, balance of September account, $19.34; T. B. Tucker, on 
account, $30. 

Had the note of E. W. Lawrence discounted at the City Bank, and received credit for 
the net proceeds. Face of note, $942.68; discount, $8.96. 

Deposited $300. 

Paid cash as follows: (Checks) Cobb, Bates & Yerxa, draft at sight for invoice cf Oct. 
29; Park & Tilford, invoice of Oct. 29, less 2%; F. H. Leggett & Co., invoice of Oct. 29, less 
3%; Armour & Co., invoice of Nov. 1, less 2% ; Swift & Co., invoice of Nov. 1, less 2%; M. 
S. Newton & Sons, invoice of Nov. 1, less 2% ; bay horse, $125; delivery wagon, $100. (Cur¬ 
rency) merchandise from National Market Co., $28.65; cleaning windows, $1.25; board of 
horse, $5; harness, $31; freight, $1.96; salaries, Canfield, $12; Stuart, $12; Carter, $15; 
Holt, $15. 

Received of C. H. Stratton his note at 60 ds., with interest added, to settle October 
account. Amount of account, $266.09; interest, 60 ds., $2.66. 

Returned to E. J. Dunn Grocery Co., 1 bale Mocha coffee, 150 lb., at 250. Too much 
of this kind was ordered. 

November 15, 19— 

Purchased of Armour & Co., Chicago, net 30, 2/10, invoice amounting to $116.20. 

Purchased of Swift & Co., Chicago, net 60, 3/10, invoice amounting to $178.95. 

Bought of M. S. Newton & Sons, Boston, net 30, 1/10, invoice amounting to $28.44. 

Bought of S. S. Pierce & Co., Boston, 60 ds., 3/10, invoice amounting to $246.39. 

Purchased of Park & Tilford, New York, net 30, 2/10, invoice amounting to $63.44. 

Bought of Cobb, Bates & Yerxa, Boston, acceptance 30 ds. from date, invoice, $213.42. 

Bought merchandise from National Market Co., for cash, $63.42. 

The following sales slips have been handed in by the salesmen. 

No. 1 C. H. Stratton, 1 bbl. G. sugar, 217 lb., at 60; 1 bbl. N. S. flour, $5.50; 1 bbl. 
pastry flour, $5.75; 1 bx. oranges, $4.75; 20 doz. S. F. eggs at 250; 20 lb. fresh fish at 110; 
12 lb. sirloin steak at 150; 22 lb. sirloin roast at 150; 500 cigars at $35 per M.; 200 cigars 
at $55 per M. 

No. 2 A. B. Ryder, 8 lb. beef roast at 160; 12 S. F. eggs, 280; | bbl. G. flour at $5.50; 
10 lb. lard at 12§0; } bu. beans at $3.20. 

No. 3 Wm. Harper, 1 qr. lamb, 16 lb., at 150; 10 lb. lard at 12J0; 6 lemons, 150; 12 
S. F. eggs, 250; 2 lb. cheese at 160; 1 sack buckwheat flour, $1.25. 

No. 4 Mrs. Wm. Hanson, 5 lb. lamb chops at 160; 18 lb. ham at 110; 8 lb. round steak 

at 140; 1 case C. tomatoes, 36 cans, at 80; 1 case C. corn, 36 cans, at 80; 1 bbl. G. flour, 

$5.25; 1 lb. pepper, 650; 1 lb. ginger, 600. 

No. 5 Edward Austin, 2 lb. halibut at 200 ; 6 lb. sir. roast at 160 ; 20 lb. G. sugar at 6J0 ; 

12 S. F. eggs, 280; 1 bbl. apples, $2.75; 1 bottle T. ketchup, 240; 1 lamp, 400. 


180 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 6 Thomas B. Tucker, 1 tub butter, 42J lb., at 220; 1 cheese, 28| lb., at 12J0; 1 
case C. tomatoes, 36 cans, at 80; 1 case C. corn, 36 cans, at 80; 1 case C. peas, 36 cans, at 
12§0; 22f lb. fresh fish at 120; 26 \ lb. chicken at 140; 18 lb. sirloin steak at 150; 24 lb. 
sirloin roast at 150. 

No. 7 J. B. Longley, 1 bbl. N. S. flour, $5.75 ; 1 bbl. pastry flour, $6 ; 32J lb. turkey 
at 150; 21 lb. lobster at 160; 5 gal. oysters at $1.20; 15 lb. codfish at 12§0; 1 bbl. G. sugar, 
231 lb., at 60. 

No. 8 Chas. A. Dodge, 6J lb. veal roast at 160 ; 12 lb. G. sugar at 6J0 ; 12 S. F. eggs, 
280; 1 bx. dried peaches, 10 lb., at 150; J gr. matches, 250. 

No. 9 Mrs. A. Waldron, 9§ lb. turkey at 160 ; 10 lb. lard at 12J0 ; 1 gal. vinegar, 250 ; 

1 lb. E. B. tea, 600; 1 qt. pickles, 150; 2 lb. raisins at 150. 

No. 10 P. J. McGuire, 1 tub butter, 43J lb., at 220; 1 tub lard, 48 lb., at 110; 22J lb. 
rib roast at 140; 11^ lb. pork roast at 100; 8 lb. sirloin steak at 150; 1 case eggs, 30 doz., at 
200; 1 doz. C. tomatoes, $1. 

No. 11 E. B. Woods, lb. chicken at 150; 15 lb. tub butter at 220; 3 lb. raisins at 150; 

2 lb. citron at 200; 2 lb. dried currants at 12^0; 8 lb. beef at 80. 

,;*■ No. 12 Mrs. F. Gilford, 4^ lb. chicken at 150; 1 sack buckwheat flour, $1.25; 1 gal. M. 
sirup, $1.25; 5 lb. lard at 12J0; 1 bx. dried apricots, 5 lb., at 200; 2 pkg. shredded wheat, 
250. 

Cash sales for the day, per cash tickets, $362.28. 

Received cash as follows: E. B. Woods, balance of October account; Mrs. A. Waldron, 
on account, $20; E. L. Corey, to balance October account; C. A. Dodge, to balance October 
account; James B. Longley, on account, $25. 

Had C. H. Stratton’s note of Oct. 15 discounted at the City Bank, and net proceeds placed 
to credit. Face of note, $212.40; interest for 4 mos., $4.25 ; discount 92 days, $3.32. 

Deposited, $400. 

Paid cash as follows : (Checks) Adams & Hackland, on account, $200; E. J. Dunn Grocery 
Co., invoice of Nov. 1, less 5% (deduct $37.50, amount of goods returned); note in favor of 
S. S. Pierce & Co., due Nov. 14, with interest; face of note, $458.95; interest, $1.53 ; Armour 
& Co., invoice of Nov. 8, less 2%; American Sugar Refining Co., invoice of Nov. 8, less 1%; 
insuring stock of groceries and fixtures one year from date; policy, $3500; premium, 1%. 
(Currency) purchases from National Market Co., $63.42; shoeing horse, $1.25; board of horses, 
$10; salaries, Canfield, $12; Stuart, $12; Holt, $15; Carter, $15; telegrams and telephone 
service, $1.87 ; freight, $17.42. 

J. M. Marsh drew cash for private use, $60. (Student) drew cash for private use, $50. 
Received of P. J. McGuire his note at 90 ds., with interest, to balance October 
account. 

Accepted Cobb, Bates & Yerxa’s draft at 30 ds. for the amount of their invoice received 
this day. 


November 22, 19— 

Bought of Gray Bros., City, 60 ds., 3/10, 92 lb. turkey at 140; 56 lb. chicken at 12§0; 
60 doz. S. F. eggs at 220. 

Bought of Armour & Co., Chicago, net 30, 2/10, invoice amounting to $112.20. 

Purchased of Swift & Co., Chicago, net 60, 3/10, invoice amounting to $168.30. 
Purchased of M. S. Newton & Sons, Boston, net 30, 2/10, invoice amounting to $34.62. 
Bought merchandise from National Market Co., for cash, amounting to $46.28. 



ADVANCED COURSE 


181 


The following sales slips have been handed in by the salesmen. 

No. 1 Mrs. A. Waldron, 2 lb. sirloin at 160; 9J lb. rib roast at 140; 15 lb. G. sugar at 
6J0; 1 bx. dried peaches, 10 lb., at 120; 1 can peas, 150; 1 bu. potatoes, 600. 

No. 2 P. J. McGuire, 2 bbl. Baldwin apples at $2.50; 10 bu. E. R. potatoes at 550; 24 

doz. case eggs at 180; 20 hd. cabbage at 80; 42 lb. beef, sirloin, at 150; 18 lb. fresh fish at 

120; 1 bbl. N. S. flour, $5.50. 

No. 3 Mrs. S. T. Worthen, 20 lb. G. sugar at 6$0; 10 lb. lard at 12J0; 12 S. F. eggs, 
280; 1 bbl. apples, $2.75; J bbl. pastry flour at $6; 6^ lb. sirloin roast at 160; 1 bottle bluing, 
100; 1 bx. stove polish, 120. 

No. 4 A. B. Ryder, 1 bx. dried peaches, 10 lb., at 120; 12 S. F. eggs, 280; 15 lb. G. sugar 

at 6J0; 9J lb. turkey at 160; 1 bx. poultry dressing, 250; 1 qt. oysters, 350. 

No. 5 C. H. Stratton, 2 bbl. N. S. flour at $5.50; 1 bbl. pastry flour, $5.75; 2 bbl. 
apples at $2.50; 1 bx. oranges, $4.25; 16 lb. sirloin steak at 150; 24 lb. sirloin roast at 140; 
18 doz. S. F. eggs at 250; 1 bu. beans, $3. 

No. 6 Mrs. Wm. Hanson, 2 pkg. rolled oats, 250; 5 doz. case eggs at 220; 25 lb. G. 
sugar at 6}0; 12 lb. rib roast at 140; 1 5-lb. can Java coffee, $1.50; 1 can E. B. tea, 10 lb., 
at 500. 

No. 7 Wm. Harper, 9 lb. chicken at 150 ; 4 lb. salt pork at 100 ; 12 S. F. eggs, 280 ; 12 
oranges, 350; 1 lb. E. B. tea, 600; 15 lb. G. sugar at 6J0. 

No. 8 E. L. Corey, 2 lb. sirloin steak at 160 ; 5 J lb. veal roast at 180 ; 1 bx. dried prunes, 
10 lb., at 150; 1 bbl. apples, $2.75; 1 lb. chocolate, 400. 

No. 9 T. B. Tucker, 25 doz. S. F. eggs at 240 ; 20 bu. E. R. potatoes at 500 ; 40 hd. lettuce 
at 20; 1 case Cream of Wheat, 36 pkg., at 12J0; 42J lb. beef, sirloin, at 150; 1 hf. cht. E. B. 
tea, 50 lb., at 600; 1 mat Java coffee, 75 lb., at 280. 

No. 10 James B. Longley, 1 mat Rio coffee, 75 lb., at 150; 1 hf. cht. Japan tea, 50 lb., 
at 350; 2 gal. oysters at $1.25; 1 tub butter, 40 \ lb., at 220; 28 lb. fresh fish at 120; 12 doz. 
case eggs at 180. 

No. 11 E. B. Woods, 1 qt. oysters, 400; 6 lb. pork loin at 12J0; 10 lb. lard at 12§0; 
1 lamp, 650; 1 lb. chocolate, 400; 1 lb. baking powder, 500. 

No. 12 Edward Austin, 8| lb. corned beef at 120; 1 hd. cabbage, 100; 5 gal. K. oil at 
130; 12 S. F. eggs, 280; 12 oranges, 350; 1 5-lb. can Java coffee, $1.50. 

Cash sales for the day, per cash tickets, $422.16. 

Received cash as follows: Mrs. S. T. Worthen, balance of October account; Mrs. Wm. 
Hanson, $25, to apply on account; Wm. Harper, to balance October account; E. Austin, to 
balance October account; T. B. Tucker, $50, to apply on account. 

Discounted at the City Bank G. M. Kelly's note, dated Sept. 19, at 4 months, with interest. 
Face of note, $622.85; interest, $12.46; discount, $6.14; net proceeds placed to credit. 

Deposited $400. 

Paid cash as follows: (Checks) Hackett Bros., invoice of Nov. 8, less 2%; S. M. Crockett 
k Co., invoice of Nov. 8, less 3%; Swift k Co., invoice of Nov. 8, less 1%. (Currency) board 
of horses, $10; railroad mileage ticket, 500 miles, $10; salaries, Canfield, $12; Stuart, $12; 
Holt, $15; Carter, $15; freight, $1.45; purchases from National Market Co., $46.28. 

Gave S. S. Pierce k Co. our note at 60 ds., with interest, to pay invoices of Oct. 29 and 
Nov. 15, less 3%. 

November 29, 19— 

Purchased of Cobb, Bates k Yerxa, acceptance 30 ds., merchandise invoiced at $182.77. 

Bought of Armour & Co., Chicago, net 30, 2/10, invoice amounting to $83.49. 


182 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Purchased of Swift & Co., Chicago, net 30, 2/10, invoice amounting to $87.96. 

Bought of M. S. Newton & Sons, Boston, net 30, 2/10, merchandise invoiced at $28.42. 

Bought of S. S. Pierce & Co., Boston, net 60, 3/10, invoice amounting to $63.14. 

Purchased produce from National Market Co., for cash, $62.46. 

The following sales slips have been handed in by the salesmen, j 

No. 1 Mrs. S. T. Worthen, 2\ lb. sirloin steak at 160; 1 lb. Ceylon tea, 800; 12 oranges, 
350; 1 broom, 300; 2 lb. raisins at 150. 

No. 2 A. B. Ryder, 1 bx. cigars, $5.50; 1 bbl. pastry flour, $6; 12 oranges, 350; 8J lb. 
lamb roast at 160; 15 lb. G. sugar at 6$0; 12 S. F. eggs, 280. 

No. 3 C. H. Stratton, 42 J lb. butter at 240; 64 lb. turkey at 150 ; 2 gal. oysters at $1.20; 
1 bbl. G. sugar, 217 lb., at 60; 1 case Ceylon tea, 50 lb., at 520; 22 doz. S. F. eggs at 260. 

No. 4 Edward Austin, 9 j lb. turkey at 160 ; \ bbl. pastry flour at $6 ; 12 bananas, 250 ; 
1 pkg. gelatine, 150; 1 bx. honey, 220. 

No. 5 E. L. Corey, 12| lb. turkey at 160 ; 1 qt. oysters, 350 ; 1 bx. cigars, $3.50 ; 1 can 
peas, 150; J gr. matches, 250; 6 lb. loaf sugar at 80. 

No. 6 P. J. McGuire, 200 cigars at $55 per M.; 500 cigars at $35 per M.; 42 lb. lamb 
at 120; 1 bbl. G. sugar, 231 lb., at 60; 22 lb. beef, sirloin, at 150; 1 mat Java coffee, 75 lb., 
at 280. 

No. 7 Mrs. A. Waldron, 1 bbl. pastry flour, $6 ; 20 lb. tub butter at 250 ; lb. veal, 

roast, at 180; 1 can peas, 150; | lb. pepper at 800; 2 pkg. shredded wheat, 250. 

No. 8 Mrs. Fred Gilford, 8| lb. sirloin roast at 160 ; 1 bbl. pastry flour, $6 ; 4 lb, dried 

peaches at 120; 12 S. F. eggs, 280; 1 can peas, 150. 

No. 9 Chas. A. Dodge, J bbl. pastry flour at $6; 8J lb. sirloin roast at 160 ; 1 lb. cocoa, 
400; 1 5-lb. can Java coffee, $1.50; 1 qt. pickles, 150; 2 lb. cheese at 160; 5 lb. print butter 
at 300. 

No. 10 T. B. Tucker, 1 hf. cht. E. B. tea, 60 lb., at 500; 1 gal. olive oil, $2.50; 22 lb. 
fresh fish at 120; 48 lb. beef, sirloin, at 150; 1 doz. T. ketchup, $2; 1 bbl. G. sugar, 226 lb., 
at 60; 10 bu. E. R. potatoes at 550 ; 1 bbl. pastry flour, $6; 103 lb. winter squash at 20. 

No. 11 James B. Longley, 26 lb. lobster at 160; 3 gal. oysters at $1.25; 500 oysters, 
New York count, at 600 per C.; 52 lb. turkey at 150; 1 gal. olive oil, $2.50; 22 lb. sirloin 
steak at 150. 

No. 12 Mrs. Wm. Hanson, 1 bbl. N. S. flour, $5.75; 4 doz. case eggs at 200 ; 23 J lb. turkey 
at 150; 9| lb. fresh fish at 120; 1 case corn, 36 cans, at 80; 1 case tomatoes, 36 cans, at 80. 

Cash sales for the day, per cash tickets, $436.98. 

Received cash as follows : Mrs. A. Waldron, to balance October account; Mrs. Wm. Han¬ 
son, to balance October account; J. B. Longley, on account, $25. 

Sold one horse for $90. 

Had C. H. Stratton’s note of the 8th inst. discounted. Face of note, $268.75; discount, 
$1.75 ; net proceeds placed to credit. 

Deposited $350. 

Paid cash as follows : (Checks) Adams & Hackland, on account, $200; Cavanaugh Bros., 
for bay horse to replace the one sold this day, $125; M. S. Newton & Sons, bills of Nov. 8 and 
Nov. 15, less 1% ; Armour & Co., invoice of Nov. 15, less 2%; Swift & Co., bill of Nov. 15, 
less 3%. (Currency) purchases from Nat. Market Co., $62.46; freight, $4.27 ; board of horses, 
$10; shoeing horse, $1.25; salaries, Canfield, $12; Stuart, $12; Carter, $15; Holt, $15. 

J. M. Marsh drew cash for private use, $25. (Student) drew cash for private use, $25. 

Close your cash book, purchases journal, and abstract sales book. 


ADVANCED COURSE 


183 


Following is a model form for the closing of the credit side of your cash book. 



30 


Accounts Paya 

ble Dr. 


30 


Discount on P 

urchases Cr. 


30 


Cash Cr. 



30 


Balance on ha 

nd 

— 






7642 

50 











76 

92 



9456 

231 

9687 

18 

13 

31 


Posting. First. Post from your statement sheets, from.the debit side of the cash book, 
and from the journal to the card ledger, as in October. 

Second. Post the total of the “ Sales on Account ” column of the Abstract Sales Book 
to the debit of Accounts Receivable in the general ledger. Post the total of the “ Accounts 
Receivable ” column in the cash book to the credit of Accounts Receivable account in the 
general ledger. Post the total of the credits to customers in the journal to the credit of Accounts 
Receivable. 

Third. Post the amount of the “ Monthly Sales ” column of the Abstract Sales Book to 
the credit of Sales in your general ledger. 

Fourth. Post the footing of the “ Amount of Invoice ” column in the purchases journal to 
the debit side of Purchases Account and to the credit side of Accounts Payable in the general 
ledger, and post each separate invoice, except cash purchases, to the credit of the proper ac¬ 
count in the purchases ledger. 

Fifth. Post the total of the “ Accounts Payable ” column in the cash book to the debit 
of Accounts Payable in the general ledger. Post the charges to creditors in the journal to the 
debit of proper accounts in the purchases ledger and the total of such charges to the debit of 
Accounts Payable in the general ledger. 

Sixth. Post the total of the “ Discount on Purchases ” column in the cash book to the 
credit of that account in the general ledger and the total of “ Discount on Notes Receivable ” 
to the debit of that account in the same ledger. 

Seventh. Post all other items in the journal and cash book as you have done hitherto in 
double entry sets. 

The inventory of unsold merchandise amounts to $4595.21. Horses, wagon, and har¬ 
nesses are valued at $500; furniture and fixtures valued at $112.50; unexpired insurance, 
$32.08. 

Take a trial balance of the general ledger. Make a schedule of the balances of the accounts 
in your card ledger and compare the total of such balances with the balance of the Accounts 
Receivable account in the general ledger. If they do not agree find your mistake. 

Make a schedule of the balances in your purchases ledger and compare the total of such 
balances with the balance of the Accounts Payable account in your general ledger. If they do 
not agree find your mistake. 

Make a statement of losses and gains and a statement of resources and liabilities (see forms, 
pages 184 and 185). 

Close the general ledger by making closing entries in the journal and posting such entries 
from that book. 

Take final Trial Balance. 

Hand your books and vouchers to your teacher for inspection. 






























184 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


White and Marsh 

Profit and Loss Statement, November 1-30, 19- 




$4516 

32 

$3875 

24 



3216 

28 



25 

17 



$7116 

69 



3005 

65 

4111 

04 



$405 

28 

$226 




2 

92 



40 




5 




7 

29 



50 




12 

50 

343 

71 



$61 

57 

$175 

12 



14 

28 

$189 

40 



$250 

97 



$15 

07 



$235 

90 

$117 

95 



117 

95 

235 

90 






Sales for Month 
Deduct: 

Cost of Goods Sold : 

Inventory November 1, 19— 

Purchases 
Freight-In 
Total Cost of Goods 
Less: 

Inventory November 30, 19— 

Gross Profit on Sales 
Deduct: 

Operating Expenses: 

Salaries 

Insurance Cost $35. 

Less : Unexpired Insurance 32.08 

Stable Expense 

Office Supplies 

Miscellaneous Expenses 

Depreciation on: 

Horses and Wagons 
Furniture and Fixtures 
Net Profit from Operations 
Add: 

Other Income 

Discount on Purchases 
Interest on Notes Receivable 
Total Income 
Deduct: 

Other Charges 

Discount on Sales 
Net Profit: 

Distributed as follows: 

A. B. White one-half 
C. D. Marsh one-half 


EXERCISES 

Note. — The entries, statements, etc., called for in these exercises should be made on loose jour¬ 
nal paper. 

1 Determine the percentage of loss for the month of October on the capital invested. 

The percentage on capital invested is found by comparing the net gain or net loss with the net capital. 

2 Determine the percentage of gross gain from sales in the month of November as shown 
by your statement of losses and gains. 

The percentage of gross gains from sales is found by dividing the amount of the gross gain by the 
amount of the sales; and the percentage of net gain is found by dividing the amount of the net gain by 
the amount of the sales. 

3 Determine the percentage of net gain on sales for November, as shown by your statement 
of losses and gains. 

4 Determine the percentage of net gain for November on the capital invested, as shown 
by your statement of resources and liabilities. 































ADVANCED COURSE 


185 


White and Marsh 


Balance Sheet, November 30 , 19 — 


■--—- 


Assets 

Current Assets: 

Cask 

Notes Receivable 

Accounts Receivable 

Merchandise Inventory 


$984 

215 

2236 

3005 

06 

98 

69 

65 

$6442 

38 



Fixed Assets: 

Horses and Wagons 

Furniture and Fixtures 


$450 

125 


575 




Expense Items Paid in Advance: 
Insurance Unexpired 




32 

08 



Total Assets 




$7049 

46 



Liabilities and Capital 

Current Liabilities: 

Notes Payable 

Accounts Payable 


$529 

798 

25 

75 





Total Liabilities 

Capital: 

A. B. White Investment 
| net profit 

$2742.78 

117.95 

2860 

73 

$1328 




C. D. Marsh Investment 
\ net profit 

2742.78 

117.95 

2860 

73 

5721 

46 



Total Liabilities and Capital 




$7049 

46 










5 Determine the percentage for running the business for the month of November, as 
shown by your statement of losses and gains. 

6 H. C. Bowen has been conducting a retail dry goods business and keeping his books 
by single-entry. His present worth at the beginning of the year, as shown by his books, was 
$5826.13, and his present resources and liabilities at the end of the year are as follows : 

Resources: Merchandise inventory, $4783.24; Furniture and fixtures, $450; Motor de¬ 
livery wagon, $1500; Cash as per cash register, $36.46; Cash in bank as per check book, 
$1242.81; Accounts receivable as per customers’ ledger, $375.52; Unexpired insurance, $39.25. 

Liabilities: Accounts payable as per purchases ledger, $1275; Note payable as per notes 
payable book, $300. 

Determine (1) Bowen’s present worth; (2) the net gain or net loss for the year; (3) the 
percentage of gain or loss for the year on the capital investment. 

7 Show the journal entry you would make if you were employed by Mr. Bowen to change 
his books from single entry to double entry, and explain the steps you would take in making 
the change. 

8 T. H. O’Meara is doing a retail business and has been keeping his books by single 
entry. He engages you as bookkeeper and instructs you to open and keep a set of double 
entry books. Suppose, after you have opened the new books, you should discover that Jones & 
Co. hold Mr. O’Meara’s note for $250, and that it had not been included in the list of resources 
and liabilities. Show the entry or entries that would be made for this item, to correct the 
omission. 

9 You have changed a set of books from single entry to double entry, and the proprietor’s 
investment account shows his present worth to be $7836.51. Suppose a customer’s account, 





























186 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


amounting to $28.75, which the proprietor had considered worthless, and which was not in¬ 
cluded in the new books, is paid in full in cash. Show the entry or entries you would make for 
this item. 

10 J. M. Irwin is conducting a retail grocery and meat business in two adjoining stores. 
T. A. Coleman, desiring to purchase a going business, offers Irwin $3500 cash for the good will, 
stock in trade, and fixtures of the grocery part of the business, and the lease rights of the grocery 
store. Assume that Mr. Irwin has accepted the proposition, that a bill of sale has been executed, 
and that the cash has been paid. All bills for the grocery stock have been paid by Irwin, and 
he will collect all bills due him for groceries. 

If the books are kept by single entry, show the entry or entries on Irwin’s books for the 
above transaction. Show the same on Coleman’s books. 

11 Assume that Coleman will keep his books by double entry. Show the proper entry 
or entries for the transaction in No. 10, estimating the good will at $500, the fixtures at $300, 
and the stock of groceries at $2700. 

12 Eden & Kline are conducting a retail business, and their books on Dec. 31, 19—, showed 
that their sales for the year were $12,687.92; their purchases, $9454.45; and stock on hand at 
beginning of year, $7675.86. The following accounts showed debit balances : Freight, $64.32; 
Salaries, $1575; Expense, $254.93 ; Furniture and Fixtures, $850; Horses and Wagons, $425 ; 
Notes Receivable, $246.39. An abstract of the customers’ ledger showed amounts due, 
$2916.57 ; cash on hand and in bank, $891.27. The following accounts showed credit balances : 
F. R. Eden, $5000; J. B. Kline, $5000; Notes Payable, $1227.46; Accounts Payable, $314.39; 
Interest, $6.74; Purchases Discount, $117.28. 

The inventories were as follows: Merchandise, $7886.25; Horses and Wagons, $375; 
Furniture and Fixtures, $750; Insurance, unexpired, $54.65; Interest accrued on notes payable, 
$11.04. 

From the above data make a trial balance, a statement of losses and gains, and a statement 
of resources and liabilities. Show the percentages of gross gain and net gain from the business, 
and the percentage of net gain on the capital. 

13 Assume that Eden & Kline decided to keep their books by single entry after Dec. 31, 
19—, running personal accounts only, and that the ledger has been closed as of that date. 
Show the journal entry you would make to change their books from double- to single entry, 
using the data on their statement of resources and liabilities (No. 12). 

Since only personal accounts are to be run (kept), it will be necessary for you to make such an entry as 
will, when posted, close all other accounts. Make an entry as if you were going to close all of the accounts, 
then check the personal accounts; the remaining items, when posted, would close the impersonal accounts, 
and the ledger would then be in single entry form. 

14 Suppose that Eden & Kline’s business year ended June 30, instead of Dec. 31, and 
that they decided to change their books on the former date, without taking inventories, or 
determining the condition of the business. Show the journal entry you would make to effect 
the change. 

While it is necessary to know the actual resources and liabilities of the business to change from single 
to double entry, only the open accounts need be considered in changing from double- to single entry. A 
trial balance should be taken which will serve as the basis of the journal entry. 

The following exercises are given for practice in schools which have adding machines : 

15 Determine from the daily sales slips the number of eggs sold on account in October 
by listing the quantities in units (single articles); the number sold on account in November; 
show the quantity in dozens below the footing of each list. 


ADVANCED COURSE 


187 


16 Recapitulate the daily sales and prove your abstract sales sheet for October by listing 
first, your charge sales for that month, and show sub-totals; and second, your daily cash sales, 
and show total sales for each day. 

17 Prove your daily charge postings to customers’ accounts for November by listing the 
charge items to these accounts and comparing the footing of each day’s postings with the 
amount of the charge sales, or sub-totals, for each day on the recapitulation list. 

18 Prove your monthly statements for October by listing your charge postings for that 
month, showing the amount of each statement as a sub-total, and the total of the statements. 

QUESTIONS 

1 In what respect does a single entry ledger differ from the ledger of a business in which the books 
are kept by double entry? 

2 How would you keep a record of cash transactions, and how would you determine the amount of 
notes receivable and the amount of notes payable at any stated time? 

3 How would you keep a record of your merchandise? 

4 Is it possible to show as complete a record of the business by single entry as by double entry? 

5 What does the single entry journal contain? 

6 Describe the sales slip, and explain its use in the retail grocery business. Why are sales slips 
written in duplicate? 

7 Describe the method of making cash sales and of recording the amounts of such sales. 

8 To what books are the cash sales of the day carried ? 

9 Explain the abstract sales sheet and the abstract sales book. 

10 Of what is the purchases journal an abstract? What will the footing of its Amount of Invoice 
column show? 

11 What will the total footing of the abstract sales book show at any time? 

12 Where are the items of the sales slips carried, and when should this be done? 

13 What should the customer’s monthly statement contain, and what should his account in the 
ledger contain? 

14 What advantages has the card ledger over the ordinary book form of ledger? 

15 How should customers’ statements be posted to the card ledger? 

16 What is the hist step you would take preparatory to changing a set of books from single to 
double entry? 

17 What additional steps would you take? 

18 How do you obtain the necessary balances of the additional ledger accounts? 

19 What additional accounts must be opened in the ledger when changing from single to double 
entry ? 

20 Suppose a resource or a liability item had been omitted in making the statement of resources and 
liabilities and was not discovered until after the books had been changed to double entry. How would 
you correct the omission? 

21 Name an account which will always be affected by the correction of such an omission. 

22 How would you change a set of books from double entry to single entry ? 

23 Could the same books be used after the change had been made? Explain. 

24 Which method of bookkeeping do you prefer, single or double entry, for an ordinary retaiJ 
business ? 

25 Under what conditions would you prefer the other method? 


COMMISSION, SHIPPING, AND MERCHANDISING BUSINESS 

A large variety of produce and manufactured products are shipped to trade centers, and 
there sold to the wholesale and retail trades through the medium of correspondents who are 
known as Commission Merchants. 

A Commission Merchant is a person engaged in receiving and selling goods belonging to 
others, for a compensation called a commission, which is generally a certain per cent on the 
sales. The property is generally sold at the current market rates. Sometimes the shipper 
leaves the matter of price and terms to the judgment of the commission merchant. This is 
generally done in the produce commission business, and in other branches of the commission 
business which deal with perishable property; but in case of manufactured products, the 
shipper usually limits the price below which the goods must not be sold, and also establishes 
the terms of credit. 

Some commission merchants do both a shipping and a commission business, and a few 
do a general merchandising business in connection with the shipping and commission business. 

Shipments and Consignments. — When property is shipped to be sold, it is called a “ Ship¬ 
ment,” and the party who ships it is called the “ Consignor.” When property is received to 
be sold, it is called a “ Consignment,” and the party who receives the property is called the 
“ Consignee.” The consignor generally sends the consignee notice of a shipment in the form 
of a letter of advice, or a consignment invoice, and a bill of lading. 

Shipments Account. — The Shipments account is an account with the goods (merchandise) 
which we have shipped to others to be sold on commission. The debit side represents the total 
cost of all goods shipped, and the credit side shows the proceeds of the goods which have been 
sold for us, and for which we have received an account sales. When we have received accounts 
sales for all goods shipped, the difference between the debit and credit sides of the Shipments 
account will be either a gain or a loss. If all our shipments have not been closed out and ac¬ 
counted for, the value of the unsold shipments is a resource inventory. This includes the 
original cost of the goods shipped, as well as any additional cost, such as freight, insurance, and 
drayage. We consider any unsold goods which we have shipped to be sold on our account and 
risk as worth what we have put into them. 

Consignments Account. — The credit side of the Consignments account represents the 
total sales from all consignments, and the debit side includes all costs, charges, and net pro¬ 
ceeds. Since the net proceeds on each consignment are determined by taking the difference 
between the sum of the costs and charges (including advances) and the amount of the sales, 
it will be seen that when all consignments have been sold out and accounts sales rendered, the 
Consignments account must balance. 

If the account has a debit balance, it signifies that the costs and advances which have been 
made upon open consignments are greater than the sales from these consignments. In such 
a case the difference is a resource or asset, since it is the amount due from the consignors. 

If the Consignments account is larger on the credit side, it indicates that the total of the 
sales from consignments for which you have not rendered accounts sales is greater than the 
costs and any advances which you have made. This difference would be due the consignors, 
and therefore is a liability. 


188 


ADVANCED COURSE 


189 


It is clear, then, that if the Consignments account does not balance, it will show either a 
resource or a liability, and will appear on one or the other side of the Statement of Resources 
and Liabilities. 

Although the student will receive special instructions in regard to the entries for the various 
transactions as they occur, it will be well for him to bear in mind continually the following 
general rules, which govern all entries for shipment and consignment accounts. 

Rule for Shipments 

Shipments Account is debited for the total cost of the goods shipped, and is credited for 
the net proceeds. 

Rule for Consignments 

Consignments Account is debited for all costs, charges, and net proceeds returned to the 
consignor, and is credited for all sales. 

Books Kept. — The books kept in a shipping and commission business depend upon the 
kind of goods handled and the magnitude of the business. The following set illustrates a 
method of bookkeeping adapted to the requirements of the produce commission business. 

The books to be kept in this work are sales book, account sales register, shipment ledger, 
cash book, purchases journal, journal, general ledger, and loose-leaf consignment ledger. The 
forms of the purchases journal and the journal will be the same as those you have kept in the 
Introductory Course. As but few notes appear in these transactions, the notes receivable and 
notes payable books will be dispensed with. 

It is the custom of most commission houses to enter a description of each lot of goods re¬ 
ceived in a book called the receiving book, which is usually a book about six inches wide with 
rulings like those of an ordinary daybook. The entries in this book are made in pencil, and the 
book is kept by the clerk in the store or warehouse. The receiving book is left in the office at 
the close of the day, or at other convenient times, so that the bookkeeper can make the neces¬ 
sary entries from it. Commission houses generally use two sets of receiving books, so that 
those which are in use by the receiving clerk on one day will be in the office on the next. 

An account is opened with each lot of goods under an appropriate name in a book called 
the consignment ledger. Each account contains on its credit side all sales made from the lot 
of which it is the record, and on its debit side all charges against this lot. When the lot is all 
sold, an account sales is rendered to the consignor. 

By the use of the loose-leaf consignment ledger, a description of which follows, the re¬ 
ceiving book, consignment ledger, and account sales are combined in one, and the bookkeeping 
is greatly simplified. 

Each consignment should be accompanied by a letter of advice, containing the list of goods, 
and this letter should be compared with the goods when they are received, and if there is any 
shortage, the consignor should be notified at once. The receiving clerk generally enters the 
goods on a blotter as they are unloaded from the trucks, and from the blotter the bookkeeper 
transfers the items to a loose leaf of the consignment ledger. (See model, page 190.) 

When a consignment is received, the lot number given it is stenciled or marked upon each package, 
if the package is not already so marked, and the goods are thereafter known, while in the store or ware¬ 
house and when sales are made from them, by that number. Goods which are not in packages, and 
which are of such a nature that a lot number cannot conveniently be put upon them, are placed in stalls 
or apart from other goods, and a placard bearing the lot number is posted up over them. A knowledge 
of the sources from which the commission merchant obtains his consigned goods is valuable to him, and 
he desires to conceal it from his competitors and customers. It is partly for this reason that he uses lot 
numbers or arbitrary marks to identify the goods while they are in his store or warehouse. 


190 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 



The Consignment Ledger. — In this business, when goods are received to be sold on com¬ 
mission, the consignment will be entered on a loose leaf of the consignment ledger, as shown 
in the illustration on this page. The consignment ledger is a subsidiary ledger. 

In the small square at the upper right-hand corner of this loose leaf is written the stencil, 
or private mark, of this consignment, and every package in the consignment will be marked 
with the same stencil. These stencil marks are arbitrary, and any letter, number, or symbol 
may be used. In this business the initial letter of the consignor and the number of his con¬ 
signment will be used as a stencil mark. The loose leaf is now fastened to its cover and becomes 
a part of the consignment ledger. The amount of freight as shown by the freight bill, which 
will accompany the goods, should be entered in the left-hand or debit column of the loose leaf 
opposite Freight. This may be done at the time the goods are received, or later, when the 
amount is taken from the cash book. As the goods are sold, the items are entered in the space 
under Sales on the loose leaf, and the amounts carried to the right-hand or credit column. 
These amounts should be taken from the sales book, where they will be found in the special 
column for consignments. The contents of this column should be carried to the consignment 
ledger at the close of each day. 


























ADVANCED COURSE 


191 


When all the goods which make up the consignment have been sold, the right-hand or 
credit column is footed and the amount placed at the bottom of the loose leaf. 

If any sight drafts have been paid or time drafts accepted on account of this consignment, 
the amount should be placed opposite Advances in the debit column of the loose leaf. Such 
amounts will be found in the consignment column on the credit side of the cash book. Every¬ 
thing in this column should be carried to the debit side of the consignment ledger at the close 
of each day. The commission should now be calculated, and also any charges which may be 
due for cartage, insurance, storage, or other items of expense. In this business these items, 
except commission, will be combined under the head of “ Charges.” Enter the amount of 
commission and of charges in the left-hand or debit column of the loose leaf. The difference 
between the footing of the right-hand column and the sum of the items in the left-hand column 
of the loose leaf will show the net proceeds or amount due the consignor, and will, of course, 
balance the two columns of the loose leaf. 

All writing upon the consignment ledger should be done in copying ink, for the leaf is now 
removed from the ledger, and a copy of it taken in the impression account sales book, the leaf 
itself being sent to the consignor with a check or draft for the amount of his net proceeds, unless 
the net proceeds are placed to his credit. In the latter case, the account sales should be sent 
without the remittance, and after Net proceeds the words Placed to credit should be written. 
It is important that a good copy of the account sales be taken in the impression book, for should 
any dispute arise this impression book will be accepted in court as your book of original entry, 
and many houses post charges, commission, and net proceeds directly from this book to their 
respective accounts in the ledger. 

Shipment Ledger. — When goods are sent to other persons to be sold on commission, the 
date of shipment is written in the shipment ledger, with the name and address of the consignee, 
and the number of the shipment; then follows a description of the merchandise shipped, with 
the price, which, in a regular shipping business, should be the cost of the goods. (See form of 
shipment ledger, page 192.) The shipment ledger is a subsidiary ledger. 

In the debit column, under Ledger Accounts, should be written the value of the merchandise 
as shown in the Merchandise column, and to this column is also posted, from the cash book, all 
expenses incurred on account of this shipment. 

When an account sales of a shipment is received, the shipment is credited for the net pro¬ 
ceeds from the cash book or journal, and since this disposes of the shipment, the ledger part of 
it is closed by writing in the usual way the amount of gain or loss on the smaller side of the 
account, and ruling and footing. (See models, A. M. Archer and D. W. Parks & Co., in 
the illustration on page 192.) 

When the books are posted preparatory to the taking of a trial balance, the total of the 
Merchandise column in the shipment ledger is carried to the debit of Shipments and to the 
credit of Purchases in the general ledger. (See form of shipment ledger.) 

The shipment ledger is a combined journal or sales book and ledger, the portion to the left 
of the Ledger Accounts columns partaking of the nature of a journal, and the part to the 
right of the Mdse, column being the ledger proper. When a shipment is made and entered 
in the Shipment ledger, it is equivalent to debiting Shipments and crediting Purchases in the 
journal and then posting the entries to the ledger. Each account in the shipment ledger is 
closed the same as in an ordinary ledger. 

Controlling Accounts and Subsidiary Ledgers. (See page 173.; — This method of handling 
ledgers is illustrated in this set by placing all shipment accounts in the shipment ledger, all 
consignment accounts in the consignment ledger, and all the remaining accounts in the general 


192 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Shipment Ledger 



Index, 

Check, 

and 

Folio 

Jan. 2, 19— 

Mdse. 

Ledger Accounts 

Debits 

Credits 

Folio and 
Explanation 

Date 



A. M. Archer, #1, Brooklyn, N. Y. 












100 bbl. Apples, N. S., 2.80 

280 


712 









30 tubs Butter, 1800 lb., 20^ 

360 




785 

90 

C. 4 

Jan. 

9 



20 cs. Eggs, S. F., 480 doz., 15^ 

72 


73 

90 



Gain 


9 



Via National Despatch, 















785 

90 

785 

90 






4 

F. W. Smith Com. Co., #1, Boston. 












250 bbl. Apples, Baldwin, 2.50 

625 


733 









30 cs. Eggs, S. F., 720 doz., 15?f 

108 











Via National Despatch, 












5 

D. W. Parks & Co., # 4, Pittsburg, Pa. 












2400 bu. Potatoes, 35^ 

912 


961 









20 bbl. Apples, Baldwin, 2.45 

49 


17 

50 



C. 5 

Jan. 

5 



Via Interstate Line, 





942 

60 

C. 4 


16 








35 

90 

Loss 


16 






978 

50 

978 

50 






5 

Jas. F. Brennam, #1, New York. 












50 tubs Butter, 3050 lb., 20 

610 


748 

60 








12 bx. Cheese, 1260 lb., 11 

138 

60 










Via Interstate Line, 












Shipments, Dr. 

3154 

60 









3/2 

Purchases, Cr. 











ledger. The accounts in the subsidiary ledgers are said to underlie the controlling accounts 
which represent them in the general ledger. In the general ledger there will be opened a Ship¬ 
ments account, representing or controlling the shipment ledger, and a Consignments account, 
representing or controlling the consignments ledger. Note that all debits and credits of ship¬ 
ments and consignments when originally entered in the cash book, sales book, account sales 
register, and the journal portion of the shipment ledger, are placed in separate columns so that 
they may be footed at the end of the month and posted to the Shipments and Consignments 
accounts in the general ledger. 

When the trial balance is taken, the general ledger will balance by itself. If it is desired, 
an abstract may be taken of the shipment and consignment ledgers, and it will be seen that, 
if the work is correct, the balance of the shipment ledger will agree with the balance of the 
Shipments account in the general ledger, while the balance of the consignment ledger will be 
the same as the balance of the Consignments account in the general ledger. 

Sales Book. — The sales book contains a special column for sales made from consignments, 
and an Invoice extension column, which should contain the items and the total of the bill given 
the purchaser, who, as a rule, does not know whether the goods are purchased from a consign¬ 
ment or from the stock of the business. (See model, page 193.) 






































ADVANCED COURSE 


193 


Salks Book. 









































194 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Account Sales 


Date 

No. 

Consignor 

Address 

Total Sales 

Freight and 
Cartage 

Commission 

Charges 

Jan. 

10 

K-l 

J. M. Kendall 

Rochester, N. Y. 

203 


10 


10 

15 

1 

75 


24 

J-2 

E. M. Jackson 

Elmira, N. Y. 

774 


64 

60 

38 

70 

4 



26 

M-l 

C. D. Martin 

Utica, N. Y. 

582 

60 

21 

40 

29 

13 

2 

50 


30 

K-2 

J. M. Kendall 

Rochester, N. Y. 

225 


7 

50 

11 

25 

1 

50 










89 

23 














9 

75 


When sales are entered in the sales book, the stencil mark of the consignment should be 
written opposite those items which are taken from consignments, and the amounts should be 
placed in the Consignments column, as well as in the Invoice Extension column. The amounts 
of such items as are sold from the stock of the business should be placed in the Sales column. 

When the sales book is posted, the total of Consignments column should be carried to the 
credit of Consignments (controlling account) in the general ledger, and the total of the Sales 
Cr. column to the credit of Sales in the general ledger. 

In this month’s work cash sales will not be posted to the debit of the person making the 
purchase, as in previous work, and then posted back to his credit from the cash book, but such 
sales will be checked off in the sales book and also in the cash book, and not posted to the per¬ 
sonal account from either book. This method of handling sales for cash is used where there 
is no special desire to keep a record of the amount of business transacted with each customer, 
and it will be seen that it saves a considerable amount of posting where cash sales are numerous. 
(See E. M. Lacy entries in form of sales book, and form of cash book, pages 193 and 196-197.) 

Account Sales Register. — The account sales register is kept for convenience in posting 
commission and charges, and contains columns for the date, stencil mark of the consignment, 
name and address of the consignor, amount of gross sales, freight, commission, charges, goods 
returned, total charges, advances, net proceeds, cash remitted, amount to be posted, folio, 
name of account. 

If accounts are kept with insurance, cartage, storage, etc., of course columns would be added for these 
accounts, as well as for commission and charges. In this month’s work all these accounts are included 
under the general head Charges. 

When an account sales is rendered, the necessary information should also be entered in 
the account sales register; and at the time of the general posting before a trial balance is taken, 
the footings of Commission and Charges columns should be carried to the Amount to be Posted 
column, and the names Commission and Charges written in the Name of Account column opposite 
these amounts in the account sales register. The total of Amount to be Posted column should 
be posted to the debit of Consignments, and the items which make up this total posted in the 
general ledger to the credit of the accounts to which they belong. 

If an impression of the loose leaf of the consignment ledger is taken when an account sales is rendered, 
the account sales register may be dispensed with, as the commission charges, net proceeds, and total to 
consignments may be posted directly from the impression book. 

Letter Impression Book. — In most business houses it is the custom to keep a copy of 
every written order, letter, postal card, account sales, deposit slip, etc., which leaves the house 
in the course of its business, as it is often of great importance that ready reference may be 
made to copies of such papers. This copy is obtained by means of a roller copying machine, 



























ADVANCED COURSE 


195 


Register 


Packages 

Returned 

Total 

Charges 

Advances 

Net 

Proceeds 

Check or 
Draft 

Amount to 
be Posted 

L.F. 

Name of Account 


21 

90 



181 

10 

181 

10 








107 

30 

300 


366 

70 



366 

70 

74 

E. M. Jackson, 

Cr. 


5 bx. 

53 

03 

200 


329 

57 

329 

57 








20 

25 



204 

75 

204 

75 
















89 

23 

58 

Commission, 

Cr. 











9 

75 

59 

Charges, 

Cr. 











465 

68 

47 

Consignments, 

Dr. 



or of a letter impression book, which is made up of leaves of tissue paper, and a copy may 
be taken in this book from either a pen-written or a type-written sheet. If proper ink is used 
several copies may be taken from the same original. 

When letters or invoices are copied in the letter impression book, they should be indexed 
at once for ready reference. (See form of letter impression book, page 198, showing the proper 
indexing.) When copied on the machine, the tissue copy is filed with the original communi¬ 
cation. 

Indexing. — It is important that all ledgers, as well as letter impression books, be properly 
indexed. 

The vowel index shown in the model letter impression book is an excellent method of in¬ 
dexing, when the index is a part of the book itself, but the ledger index is generally a separate 
book, of which there are several labor-saving varieties on the market. 

The card form of index is another and popular method of indexing accounts, where the 
number of accounts is large. A card is used for each account, and it may contain the name of 
the account, the number, address, ledger page, terms, etc. The cards are kept in trays in a 
cabinet, and are arranged in alphabetic or numerical order, with proper guide cards showing 
the important divisions. The advantages of the card index are similar to those of the card 
ledger, explained in the-Retail Grocery Business. 

Some bookkeepers, before posting a book, take the index, and from it page each item in 
the book from which posting is to be done, by writing in the folio column the page of the account 
in the ledger. After all the items to be posted have been paged, then each amount is carried 
to the ledger page indicated, and a check mark (V) is placed next to the folio figures. If the 
ledger contains a large number of accounts, this method of posting will save time and also pre¬ 
vent errors, as the check mark is a double proof that the posting has been done. In actual 
practice every good bookkeeper will soon memorize the pages of all his principal ledger accounts, 
and not be obliged to refer constantly to his index. 

Cash Book. — The cash book used in this set contains on the debit side columns for Net 
Receipts, Discount on Sales, Sundry Credits, and Shipments Cr. and on the credit side columns 
for Net Payments, Discount on Purchases, Sundry Debits, Shipments Dr., and Consignments 
Dr. (See form of cash book, pages 196 and 197.) 

The balance of cash at any time may be found by taking the difference between the Net 
Receipts and the Net Payments columns. 

Attention is called to the self-balancing feature of each side of the cash book, making it a 
cash journal composed of equal debits and credits. On the debit side, the footing of the Net 






















196 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Cash Receipts 


— 

Date 

L.F. 

Accounts Cr. 


Explanations 

Net 

Receipts 

Discount on 
Sales 

Sundry 

Cr. 

Shipments 

Cr. 

19— 














Jan. 

1 


W. H. Stevens 


investment 

3500 




3500 





2 

V 

Sales 


cash sale 

480 

75 



480 

75 




5 


Notes Receivable 


A. Barnes note 

250 




250 





7 


W. B. Andrews 


invoice I less 5% 

237 

50 

12 

50 

250 





9 


Shipt. Archer #1 


net proceeds 

785 

90 





785 

90 


11 

V 

Sales 


cash sales 

85 

75 



85 

75 




14 


Ryan & Larcum 


in full 

900 


22 

50 

922 

50 




15 


Geo. E. Marcy 


invoice 12/24 

96 

83 



96 

83 




16 


Shipt. D. W. Parker 

#4 

net proceeds 

942 

60 





942 

60 


18 


A. H.,Mears 


in full 

248 

75 



248 

75 




20 

V 

Sales 


cash sale 

67 

45 



67 

45 




23 


Shipt. C. H. Brooks 

#1 

net proceeds 

432 

27 





432 

27 


25 


Geo. Carter & Co. 


invoice 1/16 

66 

25 

8 

75 

75 





27 

V 

Sales 


cash sales 

49 

70 



49 

70 




29 


M. H. Gray 


in full 

78 

96 



78 

96 




30 


Shipt. W. F. Moore #1 

net proceeds 

206 

34 





206 

34 


31 


Cash 

(Dr.) 


8429 

05 










Discount on Sales 

(Dr.) 




43 

75 







V 

Sundry 

(Cr.) 






6105 

69 






Shipments 

(Cr.) 








2367 

11 





















8429 

05 







Feb? 

"1 


Balance 


3681.33 










Note. — Prove each side by seeing that the sum of debit columns equals the sum of credit columns. 


Receipts and Discount on Sales columns equals the footing of the Sundry Credits and Ship¬ 
ments Cr. columns. On the credit side the footings of the Net Payments and Discount on 
Purchases columns equal the footings of the Sundry Debits, Shipments Dr., and Consignments 
Dr. columns. 

By this means the bookkeeper is able to make what amounts to a daily proof of the ac¬ 
curacy of the cash book. 

The posting of items from the various columns of the cash book should be done daily, 
but the footings of the columns are not posted until the end of the month. 

Note carefully how the cash book is closed and ruled preparatory to posting the footings 
at the end of the month. 

Bank Account. — In this set keep your bank account in the check book as in the Intro¬ 
ductory Course, which is in accordance with the following method. 

Use the left-hand check stubs for a record of the deposits, and the right-hand check stubs 
for a record of the checks. The amount column of each of these stubs will be footed and car¬ 
ried forward from page to page, until it is desired to show a balance. This is done by deducting 
the total checks from the total deposits, on the left-hand check stubs. 

In entering deposits on the left-hand stubs, write the amount of each item comprising 
the deposit a little to the left of the money column, and extend only the total, or net amount, 




































ADVANCED COURSE 


197 


Cash Disbursements 


*• ' — ■*" 

Date 

L.F. 

Accounts Dr. 

Explanations 

Net 

Payments 

• • 

Discount on 
Purchases 

Sundry 

Dr. 

Shipments 

Dr. 

Consign¬ 
ments Dr. 

19— 















Jan 

2 


General Expense 

taxes 

65 




65 







3 


Freight In. 

on mdse. 

42 

75 



42 

75 






5 


Shipt. D. W.Parker #4freight 

17 

50 





17 

50 




7 


Const. J.L. Osborn #1 

( L 

18 

90 







18 

90 


9 


H. F. Wood & Bros. 

inv. | less 5 % 

570 


30 


600 







12 


Shipt.C. H. Brooks#l 

ins. & cartage 

4 

32 





4 

32 




13 


Const. J.L. Osborn#l 

net proceeds 

742 

30 







742 

30 


15 


J. C. Harper & Co. 

inv. \ less dis. 

487 

50 

14 

63 

502 

13 






16 


Salaries 

clerks 

30 




30 







16 


Shipt. W.F. Larkin #3 

ins. & cartage 

5 

25 





5 

25 




19 


Const. H. A. Savage 

net proceeds 

944 

60 







944 

60 


19 


General Expense 

exchange 


50 




50 






23 


M. B. Parks & Co. 

inv. | less 5 % 

760 


40 


800 







23 


Freight In. 

on mdse. 

68 

45 



68 

45 






25 


Const. J.L. Osborn#2 

freight 

64 

15 







64 

15 


27 


Morris & Elliott 

inv. \ less 2% 

906 

50 

18 

50 

925 







30 


Salaries 

clerks 

20 




20 







31 


Cash 

(Cr.) 

4747 

72 







« 



31 


Disc’t on Purchases 

(Cr.) 



103 

13~ 









V 

Sundry 

(Dr.) 





3053 

83 








Shipments 

(Dr.) 







27 

07~ 






Consignments 

(Dr.) 









1769 

95~ 




Balance in safe 

97.40 














bank 

3583.93 

3681 

33 














8429 

05 

























of the deposit in the money column. The record for a deposit should be a copy of the deposit 
slip, as heretofore. 

Some business houses keep a detailed record of deposits in a separate book, called a deposit book, and 
enter only the net, or total amount, and the date in the check book. Others take an impression of the 
deposit slip in a tissue book, like a letter book, or on a roller copying machine, and enter only the amount 
and date in the check book. This is one of the many labor-saving methods used in modern business houses. 

When checks are paid by the banks, they are stamped Paid, or are otherwise canceled, 
and if drawn by their own depositors, they are filed until the depositors’ pass books are written 
up, or statements are made out, when they are returned to the makers. 

On account of the freedom with which checks circulate, and the consequent liability of their getting 
into the hands of dishonest or unscrupulous persons, several means are employed to prevent the raising 
or altering of checks and other similar negotiable instruments. Two of the most common means of safe¬ 
guarding checks are by the use of safety paper on which erasures cannot be made without showing, and 
by the use of mechanical check protectors, of which there are several varieties. Some of these protectors 
rough or partly perforate the written figures in the amount, while others cut out or perforate in figures 
(omitting the cents) the amount expressed in the check. Another form cuts out or perforates the ex¬ 
pression “not over $100,” or any other desired amount. 

The cancellation of checks in banks is done either by rubber stamps or by canceling or perforating 
machines, which are operated either by hand or by electricity. These machines will cancel from ten to 
fifty or more checks in one operation, depending upon the kind of machine and the power used. 












































Letter Impression Book 


198 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 




























ADVANCED COURSE 


199 


Reconciliation of Bank 
Balance 


Reconciliation of Bank Balance. — The balance in 
the bank on any given date, as shown by the pass 
book when written up as of that date, or by the bank 
statement, will agree with the check book balance 
only when all checks issued prior to the balancing of 
the check book, and the writing up of the pass book, 
have been presented at the bank, and either certified 
or paid. This will rarely occur in a going business, 
and consequently there will generally be a difference 
between the two balances, which should be adjusted 
in the check book. This is done by adding to 
the check book balance the amount of the outstanding 
checks, as shown by the vouchers returned with the 
pass book or statement. These checks should be 
listed in detail on the check book stub. This is 
called reconciliation of bank balance. The check book 

balance is the true balance, and is the amount to be carried forward in the check book. 


July 

31 

Total deposits 

10205 

= 

94 



Total checks 

6009 

48 



True bank balance 

4196 

46 



Checks out 
Nos. 

352 103.63 

361 66.37 

365 90.04 

369 283.69 

543 

73 



Bank’s balance 

4740 

19 






19— 





Aug. 

1 

True balance 

4196 

46 


PRELIMINARY WORK 

July 1, 19— 

You have formed a partnership, under the name of E. H. Reed & Co., with Ellis H. Reed, 
who has been engaged in the Country Produce and General Merchandising business, at 312 
South St., your city. 

You are to invest $5000 cash, and also a shipment to Thos. W. Bowen & Co., Dover, 
No. 3, valued at $1955, making a total investment of $6955. Ellis H. Reed owns the build¬ 
ing at 312 South St., valued at $9500. He transfers this property, by deed, to E. H. Reed & 
Co. He also owns two horses and a delivery wagon, valued at $325, and office furniture and 
fixtures, valued at $250. He has on hand the following goods: 600 bu. potatoes, invoiced at 
60^ per bu.; 140 bbl. apples, invoiced at $3.50 per bbl.; 11 boxes cheese, 605 lb., invoiced at 
11^ per lb. 

The following personal balances from customers are due Ellis H. Reed: Theodore Crosby 
& Co., $129.33; A. W. Noone & Co., $528.44; Public Market Co., $244.60; Geo. H. Tucker 
& Co., $204.13; City Hotel Co., $250.45. 

Ellis H. Reed owes the following balances: Russell & Birkett, $426.45; Curtice, Olney 
& Co., $1326.40; Lutz Bros., $714.50; Gillette & Hennigan, $541.20; and a note in favor 
of the Fischer Flour Co., St. Louis, dated June 16 at 30 days, $845.27. 

The new firm assumes all the liabilities of Ellis H. Reed, and takes over his resources, as 
listed above. Each partner is to receive interest at six per cent on his net investment, after 
which the gains and losses are to be divided equally. 

The form on page 201 shows the journal and cash book entries for the investments of 
Ellis H. Reed and yourself which you will now make. 

Enter the shipment to Thos. W. Bowen & Co., Dover, No. 3, $1955, in the shipment'ledger. 
Write for explanation, shipped June &£, Investment of (Student). 

No. A 1 Take your investment, $5000 cash, from your voucher pad, and place it in Cast 
Drawer. 
















200 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Prepare a circular letter, soliciting shipments of country produce or general merchandise, 
and mail a copy to each of the following concerns: Rice & Pond, Georgetown; Edwin Mason 
& Co., Milford; Chas. Hunter & Co., Northboro (all in your State); Fischer Flour Co., 
St. Louis, Mo.; Iowa Packing Co., Des Moines, Iowa. 

The following is a form of circular letter: 

Form of Circular Letter 

Albany, N. Y., July 1, 1919. 

Mr. Geo. H. Ailing, 

Utica, N. Y. 

Dear Sir: 

You will be interested to know that we have opened 
at 348 Central St., this city, a large and well equipped 
store for the handling of every variety of country prod¬ 
uce -- butter, eggs, fruit, vegetables and canned goods, 
to be sold on commission. As it is also our purpose to 
conduct a general merchandising business, we are prepared 
to buy anything in the above line and will offer you the 
highest market rates. 

We handle shipments of first-class goods only, and 
are prepared to make cash advances for all staple prod¬ 
ucts on receipt of bill of lading. We render accounts 
sales and send cash remittances as soon as consignments 
are disposed of. Our charges are 5 % of sales and 1 % for 
storage and insurance. 

By permission, the First National Bank and the 
Empire Storage Company of this city will indorse our 
financial standing. 

Any business that you may favor us with will receive 
prompt attention. 

Very respectfully yours. 

The Geo. H. White Commission Co. 


Posting. — The following are the general ledger accounts to be used in the Commission 

set: 

Cash, Notes Receivable, Theodore Crosby & Co., A. W. Noone & Co., Public Market 
Co., Geo. H. Tucker & Co., City Hotel Co., Thos. Varick & Co., E. B. Dean & Co., National 
Market Co., D. W. Perry & Co., J. M. Marsh & Co., Consignments, Shipments, Merchandise 
Inventory, Real Estate, Horses and Wagons, Furniture and Fixtures, Insurance Unexpired, 
Office Supplies, Notes Payable, Russell & Birkett, Curtice Olney & Co., Lutz Bros., Gillette & 
Hennigan, Dock & Coal Co., Western N. Y. Preserving Co., Chas. Hunter & Co., E. H. Reed, 
Student, Purchases, Freight-In, Sales, Commission, Charges, Discount on Purchases, Dis¬ 
count on Sales, Discount on Notes Receivable, Salaries, Delivery Expense, General Expense, 
Profit and Loss. 


ADVANCED COURSE 


201 


Journal Entry 
July 1, 19— 



Ellis H. Reed and (student’s name) have this day entered into a 
partnership to carry on, at 312 South St., a Commission and General 
Merchandising business, under the name of E. H. Reed & Co. 






Each partner is to receive six per cent interest on his net investment, 
after which the gains and losses shall be divided equally. 






Ellis H. Reed invests the following resources and the firm assumes 
the following liabilities: 






Real Estate 

9500 





Mdse. Inventory 

916 

55 




Horses and Wagons 

325 





Furniture and Fixtures 

250 





Theodore Crosby & Co. 

129 

33 




A. W. Noone & Co. 

528 

44 




Public Market 

244 

60 




Geo. H. Tucker & Co. 

204 

13 




City Hotel Co. 

250 

45 




Russell & Birkett 



426 

45 


Curtice, Olney & Co. 



1326 

40 


Lutz Bros. 



714 

50 


Gillette & Hennigan 



541 

20 


Notes Payable 



845 

27 


Ellis H. Reed 

(Student’s name) invests cash, $5000, and a shipment, #3, to Thos. 



8494 

68 


W. Bowen & Co., Dover, valued at $1955. 





C.B. 

Cash 

5000 





Shipments 

1955 





(Student) 



6955 



Cash Book Entry 


19— 






July 

1 

V 

(Student’s name) 

Investment 

5000 


Open accounts in the general ledger for accounts on page 200, allowing four accounts to 
a page. 

It is recommended that the posting be done daily. 

The accounts with customers and creditors are kept in the general ledger, therefore there 
will be no controlling accounts kept with accounts receivable or accounts payable. As hereto¬ 
fore explained, the only controlling accounts illustrated in this set are Shipments and Consign¬ 
ments. 

Ledger Index. — Prepare an index of the ledger on the first two pages of the book, these 
having been specially ruled for the purpose. You will note that each page is divided into two 
equal parts by a vertical red line. Write a capital A in the middle of the first part at the top 
of the left-hand side. In middle of the ninth line below this, write B. On the ninth line below 
B, write C, and so on, going from the bottom of the left-hand part to the top of the right-hand 
portion of the page, and then to the next page, until every letter of the alphabet has been as¬ 
signed a space. Assign only one space to each of the following groups: H—I—J, P Q, U V, 
X—Y—Z. 
























202 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Write the names of all the accounts in the ledger in their proper alphabetic place in the 
index, and after each account write the page of the ledger on which it appears. In personal 
accounts, the initial letter of the surname or of the first principal word determines its place in 
the index. 


July 10 

Order from Gillette & Hennigan, Baltimore, Md., at their best cash discount, 20 boxes 
St. John River oranges, 50 boxes lemons, 12 doz. pineapples. 

The above and following letters should be very carefully written and submitted to your 
teacher for approval. An impression of each letter may be taken in a letter book if such a 
book is used. Ask your teacher to show you the method of taking an impression in a letter 
book. If letters are copied in this way, prepare a vowel index as shown in the illustration on 
page 198, and index your letters, using the first vowel in the surname of the person or first 
name of the firm as a guide for position. Inclose the letter in a properly addressed envelope, 
and place in Vouchers for Others. 

Order from Russell & Birkett, Penn Yan, N. Y., on account, 30 days, 50 bbl. XXX family 
flour, 50 bbl. XX family flour, 25 bbl. pastry flour. 

Order from Curtice, Olney & Co., Rome, N. Y., 36 cases, 72 doz., canned sugar corn; 
72 cases, 144 doz., canned tomatoes. Order these sent by Interstate Transportation Com¬ 
pany, fast freight, and request them to draw on you at 30 days for the amount of the bill. 

Order from Lutz Bros., Allegheny, Pa., 5 bbl. sour pickles, 4 bbl. sweet pickles, 25 cases, 
50 doz., Diamond ketchup, 16 oz. Order the goods shipped by Interstate Transportation 
Company, and request 60 days’ credit. 


TRANSACTIONS 

July 16 

No. 1 This advice of shipment accompanies a lot of goods received from Edwin Mason 
& Co., of Milford, your state, to be sold on their account and risk. 

Take from your package of business forms the pad of loose-leaf consignment sales blanks, 
and in the square at the top write the stencil mark of this consignment, which will be M-l 
(see form of loose-leaf sales blank, page 190). Fill out the consignment sales sheet with the 
date of shipment, name of consignor, etc. Opposite Received write the articles as shown by 
the advice received with the goods. (See form, page 190.) 

Paste the gummed edge of the loose leaf to the back of the cover of the consignment ledger. 
Place the advice of shipment in your Voucher File. 

It will be noticed that the freight and cartage charges on the above consignment were not paid at 
the time the goods were received. This is the practice in cities where truck or dray companies are es¬ 
tablished, and also, as regards freight charges, when proper arrangements have been made with the rail¬ 
road companies. The freight or drayage bills are brought in daily, weekly, or monthly, and one check 
is drawn for the total amount. 

In business when goods are shipped by freight, the shipper usually sends the bill of lading with in¬ 
voice or advice of shipment to the consignee. If a shipment has been made under a straight bill of lading, 
the railroad company will notify the consignee, usually by post card, when the goods have arrived and 
are ready for delivery, and the amount of freight charges, if any, on the shipment. As a rule, this notice 
must be presented at the freight office and the freight charges paid, before the goods can be taken away. 
When freight charges are paid, two receipts are given; one by the railroad company for the money, and 
the other by the consignee or his representative for the goods. These receipts are made out by the rail¬ 
road company after the arrival of the goods and before the notice is sent to the consignee. The receipts 


ADVANCED COURSE 


203 


contain the date on which they are made out; date and number of waybill; the car number and initials; 
the weight, rate and amount, and the advance charges, if any. The procedure when goods are shipped 
under an order bill of lading will be explained later. 

No. 2 This advice of shipment is received with goods mentioned from the Western New 
York Preserving Company, Springville, N. Y., and should be entered precisely as the lot re¬ 
ceived in No. 1 (W-l). Paste the gummed edge on the back of M-l. 

No. 3 This advice has been received from Rice & Pond, accompanying goods as men¬ 
tioned. 

No. 4 This invoice is for goods ordered by you July 10, from Gillette & Hennigan, and 
should be recorded in the purchases journal (Blank No. 1), as in previous work. Verify the cal¬ 
culations and O.K. the same. The receiving clerk has already O.K.’d the quantities. Verify 
all calculations and O.K. all invoices, after which record the merchandise invoices in the pur¬ 
chases journal, and file the other invoices or bills in the Voucher File. 

No. 5 This invoice from E. R. Coburn & Co. is for books and other office supplies. 

Make no entry at present. The amount will be found in your cash items to be paid at 
the end of the day, and entered at that time. 

No. 6 This invoice from Lutz Bros, is for goods ordered by you July 10. (See No. 4.) 

Sales from Blotter. — In this month's work a large number of sales will be made to local 
persons, whose orders are given verbally and are entered in an order book or blotter. You 
will receive among your incoming vouchers a list of these sales each day, and will make out 
the bills as usual. In entering these sales in the sales book be sure that the stencil mark of the 
consignment appears opposite each item sold from that consignment, and that these items are 
carried to the loose-leaf consignment ledger from the Consignments column of the sales 
book. 

A blotter was originally a kind of day book in which all transactions — purchases, sales, receipts 
and disbursements of cash, etc. — were first entered in memorandum form and from which the entries 
were transferred to the main books. Sometimes it is used for orders only, in which case it is equivalent to 
an order book. The blotter is generally made of heavy, coarse paper, and the records are made in 
pencil. 

No. 7 These sales have been made as per blotter, and should be entered in the sales book 
(see model, page 193). Be sure that the cash sale is entered in the cash book, and checked 
off both in cash book and in sales book (see explanation, page 194). Place the voucher in 
Voucher File. Make out bills for all sales as per blotter. 

In this month's work an account will be kept with freight, and all amounts paid for freight 
on your own merchandise will be charged to Freight In account. 

The items from the Consignments columns of the cash book and from the sales book 
should be carried to the loose-leaf consignment ledger at the close of each day, as it is necessary 
that they appear there before an account sales can be rendered to the consignor; and it is 
also necessary that the items in the Shipments columns of the cash book be carried to the ship¬ 
ment ledger in the same manner, as they must appear there before the closing of any accounts 
in the shipment ledger. If there are any entries to shipments or consignments in the journal, 
these should also be posted at the end of each day. 

The following is an illustration of the sales book with the first charge for July 16, show¬ 
ing the method of entering sales from consignments and regular merchandise sales together. 
The check marks show that the amount of merchandise sold from the consignment has been 
transferred to the consignment ledger. 


204 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Commission Sales Book 


July 16, 19— 






Invoice 

CONSTS. CR. 

Sales. 

Cr. 



City Hotel Co. 

a/c 

30 days 







M-l 

V 

5 cases Eggs 

120 dz. 

.22 

26 

40 





M-l 

V 

2 tubs Butter 

120 lb. 

.24 

28 

80 

55 

20 





2 boxes Lemons 


4.75 

9 

50 



9 

50 






64 

70 






No. 8 This is an order on the cashier to pay various bills. Pay the items in currency. 

Enter in your cash book, debiting the proper accounts (see model, page 197). Allow a 
line for each charge for freight paid on consignments. (Place the money in Cash Paid Out.) 
Post all freight charges on consignments from the cash book to the proper consignment in the 
loose-leaf consignment ledger, placing the amount opposite the printed word Freight. Remem¬ 
ber to debit Freight In in cash book for all freight paid on your own merchandise. 

No. 9 This account sales and draft are received from Thos. W. Bowen & Co., and as they 
have been notified of the change in your business, they have made the draft payable to E. H. 
Reed & Co. 

Enter in your cash book, crediting Shipment to Thos. W. Bowen & Co., No. 3, for the 
amount of the net proceeds, and carrying the amount of net proceeds to the credit of ship¬ 
ment No. 3, in shipment ledger. There has been a gain on this shipment. Close the shipment 
in shipment ledger by entering the amount of the gain in the debit column, the word gain in 
the explanation column, and the date in the date column. Make proper use of red ink as in 
closing other ledger accounts. (See page 192.) 

No. 10 This check has been received from Theodore Crosby & Co., in full of account, 
and is indorsed by Ellis H. Reed to E. H. Reed & Co. 

No. 11 Open an account with the Traders Bank, and deposit $4900 cash, the check of 
Theodore Crosby & Co., and the draft received from Thos. W. Bowen & Co. Copy the items 
from your deposit ticket on the left-hand stub of your check book, and extend the total into the 
money column. 

It is a good practice, as well as the usual custom, to deposit checks on the day they are received or 
on the following day. If a check is not deposited within a reasonable time, usually considered to be 
twenty-four hours, and the bank on which it is drawn should fail, the maker of the check would be dis¬ 
charged from loss occasioned by the delay of the depositor. 

You will now prove the cash and post the entries in your books in accordance with previous 
instructions. (In proving cash, include cash on hand and in bank.) 


July 17 

No. 12 This invoice has been received from Curtice-Olney & Co. 

No. 13 This advice of shipment accompanies goods received from Fischer Flour Com¬ 
pany, and incloses a draft at ten days’ sight for $300, which you will accept, payable at Traders 
Bank, and place in Notes Payable File. 




















ADVANCED COURSE 


205 


Enter the consignment on a loose-leaf sales leaf, and unde'r Advances write the amount 
of the draft, $300. Make a journal entry, debiting Consignments and crediting Notes 'pay¬ 
able for the amount of the draft, as follows: 



Consignments 

Accepted Fischer Flour Co.’s 
draft at 10 days, on account of 

300 




Notes Payable 

goods received to be sold on their 
account and risk. 



300 


No. 14 This order is received from Thomas Varick & Co. Take the canned goods from 
lot W-l — peas, $1.30; corn, $1.10; tomatoes, $1.25; and the balance of the order from your 
own goods — apples, $3.75; potatoes, 75^. (Enter in the sales book, as per model, page 193.) 
Do not forget the stencil mark. 

No. 15 This letter from F. H. Larkin & Co. solicits a shipment from you. 

Make a shipment invoice — apples, $3.50; potatoes, 60^ — and enter in your shipment 
ledger (see form, page 192). Pay for insurance, 75j£, currency, and enter in the cash book. 

In business a straight bill of lading would, of course, be made out for a shipment of this kind, but 
in view of the practice which you have had in the introductory work, the bills of lading will be omitted 
in this set. 

The following is the form of the shipment ledger as it will appear after this entry has been 
made, and after the cash paid for insurance has been posted from the Shipment column of the 
cash book at the close of the day. (Allow three lines for the closing entries.) 


Shipment Ledger 


- 

Index, 

Check, 

AND 

Folio 

July 16, 19— 

Mdse. 

Ledger Accounts 

Debits 

Credits 

Folio and 
Explanation 

Date 



Thos. W. Bowen & Co., #3, Dover, 



1955 





19— 




Shipped June 24, 





2058 

62 

C. 2 





Investment of (Student’s name). 



103 

62 



Gain 

July 

16 



17 



2058 

62 

2058 

62 






F. H. Larkin & Co., Northboro, 












50 bbl. Apples, 3.50 

175 


295 







• 


200 bu. Potatoes 60 ^ 

120 



75 



C. 3 


17 


No. 16 These sales have been made from the blotter, and should be entered in the sales 
book. The cash should be entered in the cash book. (See transaction No. 7.) 

The small cash sale of merchandise, $6, is not entered in your sales book, but posted direct to the 
credit of Sales from the cash book. In every business there will be more or less of these small sales, even 
though it be strictly wholesale business, for it is quite a common practice among business houses to send 
in friends with a request that, as a favor, a small quantity of goods be sold them at wholesale prices, and 
it is customary for a wholesale house to comply with such a request. If such sales are made from con¬ 
signments, it is necessary that they be entered in the sales book, but when made from your own goods, 
it is customary to enter them in the cash book only, and post to Sales account direct from that book. If 
many such sales are occurring, it is well to have a special column for merchandise sales in the cash book. 
In this business, as there are only a few sales of this nature, they will be carried to the General column of 
the cash book, and Sales account credited from that book. (See entries of the 11th and 27th in cash book, 
page 196.) 






































206 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 17 This invoice from Russell & Birkett is for goods ordered by you July 10. 

No. 18 These items should be entered in the cash book, and the item of $55 also entered 
in the consignment ledger, opposite Freight, Cartage, etc., on the loose leaf for Fischer Flour 
Co/s consignment. Make checks for all bills, except the one of $10 for care of horses, which 
pay in cash. 

No. 19 This check is received with an order from A. W. Noone & Co. Make cash book 
entry, but carry the order over in Voucher File until the 18th. 

No. 20 Deposit checks of W. B. Alden & Co. and A. W. Noone & Co. (Prove the cash.) 

July 18 

No. 21 Render an account sales to Edwin Mason & Co., and inclose a New York draft 
for the amount of the net proceeds. 

Turn to your consignment ledger and see that all sales from this consignment, M-l, have 
been transferred from the sales book to the second, or sales, column of the loose leaf stenciled 
M-l in the consignment ledger. Foot this second, or sales, column, and place the amount 
at the bottom of the page. Find the commission at 5%, and write in the first column of the 
loose leaf the amount $13.34. Take 1% of the sales for insurance, storage, etc., and place it 
opposite the word Charges, under which head insurance, storage, etc., will be kept in the ledger. 
Subtract the sum of the amounts in the first column from the footing of the second column, 
and place the difference opposite Net Proceeds in the first column of the loose leaf. (See model, 
page 190.) If you have made no mistake in addition or subtraction, the account will now bal¬ 
ance. To show this, rule and foot. The amount of the net proceeds is to be sent to E. Mason 
& Co. by New York draft, the cost of which you will pay. Make out a check for the amount 
of the net proceeds of the consignment plus 25 cents. 


The following is a form of check to be used in the purchase of New York drafts: 



Indorse the draft (Voucher No. 21) to E. Mason & Co. 


Some business houses have the draft made payable to the order of the person to whom it is sent, but 
it is better to make the draft payable to your own order and indorse it to the person to whom it is to be 
sent, as the draft will then show on its face the name of the party who sent it. 

Enter in your account sales register the information called for by the columns of that 
book (see pages 194 and 195), taking the amounts from the loose leaf. 

Be sure to enter the amount of the draft in the proper column. 

The form on page 190 shows the loose leaf of E. Mason & Co/s consignment No. 1 as 
it should appear at the present time. 











ADVANCED COURSE 


207 


Enter in your cash book, debiting Const. Mason & Co. No. 1 for the amount of the draft, 
and General Expense for the cost of the draft, 25j£. If a large number of New York drafts are 
sent, so that there would be a considerable amount paid for exchange, an account with col¬ 
lection and exchange should be kept, but in this business it is not thought advisable to open 
such an account, and General Expense is debited for the exchange on drafts. 

Detach the loose leaf at the perforated line from the ledger, and make a copy to keep on 
file for reference. Place the New York draft and the loose leaf (M-l) in an envelope prop¬ 
erly addressed, and place in Vouchers for Others. 

As the consignment is now closed, and you have sent the net proceeds to the consignor, 
it is evident that there is no necessity for any record of this lot in your books. If your school 
is not provided with the proper letter press, then the entry in the account sales register will 
be a sufficient record of the transaction. 

No. 22 Render an account sales of lot R-l received from Rice & Pond and remit proceeds 
by check. 

No. 23 Memorandum of shipment from Edwin Mason & Co. The stencil will be M-2. 

No. 24 Memorandum of goods consigned to you by Rice & Pond. 

No. 25 Letter from Chas. Hunter & Co. 

No. 26 Fill this order from D. W. Perry & Co., taking 3 X flour, $5.25, and Pastry flour, 
$5.50, from your own merchandise; C. E. peas, $1.30; E. J. peas, $1.50; beans, $1.20, from 
lot W-l. Draw a draft at 60 days from the date of the bill, and present it to your teacher for 
acceptance. He will accept the draft for D. W. Perry & Co. Make the proper journal entry, 
and place the acceptance in the Cash Drawer. 

No. 27 Take order No. 19, A. W. Noone & Co., from your Voucher File and make a 
bill of the goods called for, taking 20 bbl. Redcloud at $4.75 per bbl. and 20 bbl. Snowflake 
at $4.90 per bbl. from Fischer Flour Co.’s consignment No. 1, and 10 bbl. apples at $3.75 per 
bbl. from E. Mason & Co.’s consignment No. 2. 

No. 28 Sales from blotter. 

No. 29 Cashier’s payments. Make out checks for the amounts required. 

Carry all consignment sales from the sales book to the consignment ledger, and all con¬ 
signment and shipment items from the cash book to the shipment and consignment ledgers. 

Prove the cash and post as heretofore. Open new debtor accounts on page —, allowing 
one fourth of a page to each. 


July 19 

No. 30 Render an account sales of lot W-l, and place the net proceeds to the credit of 
the Western New York Preserving Company, subject to sight draft. In this case no check 
has been sent for the net proceeds, but an account will be opened with the Western New York 
Preserving Company in your general ledger. Write Placed to credit opposite Net Proceeds on 
the loose leaf. Enter in your account sales register as usual, and write the amount to be 
credited in the proper column. The net proceeds will be posted later from the account sales 
register. 

No. 31 Check.from the Public Market Co., to pay the balance due to July 1. 

No. 32 Check from G. H. Tucker & Co., to pay the balance due to July 1. 

It is not necessary to send a receipt for a check, since the check itself when paid by the bank will 
be canceled and returned to the maker, showing that the amount has been paid to the person in whose 
favor it was made. It is customary in some business houses to acknowledge the receipt of every remittance 
in some form. If a statement or invoice accompanies the remittance, it could be receipted and returned. 
If the statement or invoice is not received with the remittance, an acknowledgment should be sent. 


208 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 33 The Traders Bank presents Chas. Hunter & Co.’s draft at sight. Accept it by 
writing Accepted, July 19, 19 —, payable at Traders Bank across the face, and place in Vouchers 
for Others. In business, the draft would be returned to the bank, and the amount would be 
deducted from your balance on deposit, and the draft would come back to you when your 
vouchers are returned to you by your bank. Make an entry on the stub of your check book 
immediately below the record for the last check as follows: “ 7/19/ —, Chas. Hunter <Sc Co.’s 
dft. 300,” placing the amount in the money column to be added with the checks. Enter in 
the cash book, debiting Const. Hunter & Co. No. 1. 

Some banks, in a case like the above, or where a note or time draft is made payable at the bank, 
would require the drawee of the draft, or the maker of the note, to meet the obligation by check. 

No. 34 Sales for the day as per blotter. 

No. 35 Cashier’s payment for the day. 

No. 36 This invoice has been received from Dock & Coal Co., for your order given to the 
salesman of the house, who has recently called upon you. 

Prove the cash and post. Open new creditor accounts on page —, allowing one fourth 
of page to each. 

July 20 

No. 37 Ship to J. M. Marsh & Co., Boston, Mass., to be sold on commission, 25 bx. 
cheese, 2625 lb., at 120; 25 tubs butter, 1500 lb., at 210. Pay insurance, $1.50, in cash. 

No. 38 Ship to W. A. Simonds & Co., to be sold on commission, 1000 bu. potatoes at 62|0 r 
and pay for insurance, $1.25. 

No. 39 Draw at 30 days, on J. M. Marsh & Co., for $300, and place the draft in Traders 
Bank for collection. Make journal entry, crediting Shipments and debiting Notes Receivable, 
since it is understood that Marsh & Co. will accept the draft; also credit Shipment to J. M. 
Marsh & Co. in shipment ledger for $300. Make no entry on the stub of the check book. An 
entry will be made in the back part of your bank pass book by the teller under the head of col¬ 
lections. When the draft is collected you will receive credit for it the same as for a deposit, 
and you will then enter it on the stub of the check book. 

No. 40. Memorandum of advice from the Iowa Packing Co. 

No. 41. Fill this order from Fischer Flour Co.’s consignment — Redcloud, $4.75; 
Snowflake, $4.90. 

No. 42 Sales from blotter. 

No. 43 Render an account sales of the Fischer Flour Co.’s consignment, and send them a 
check for the net proceeds, less draft for $300 accepted July 17. 

No. 44 Invoice from Curtice-Olney & Co. 

No. 45 Invoice from Russell & Birkett. 

No. 46 Cashier’s payments. 

No. 47 Check from the City Hotel, Co., for the amount due July 1, less 5%. (See model 
in the cash book, page 196.) 

No. 48 Deposit all cash and checks on hand. 

Prove your cash, and post. Allow one fourth of a page for new accounts. 


July 23 

No. 49 This check has been received in payment of bill of July 16, less 3% on the part 
of the sale which was made from your own merchandise. See if the check is for the correct 
amount, and if so, enter it in your cash book. Enter in Discount on Sales column the differ¬ 
ence between the amount of the check and the amount of the bill. 


ADVANCED COURSE 209 

No. 50 This check is in payment of bill of the 17th, less 3% on that part which was taken 
from your own merchandise. (Enter as in No. 49.) 

No. 51 Memorandum of shipment by the Fischer Flour Co., under an order bill of lad¬ 
ing, with the accompanying sight draft for $500, which is presented by your bank. Accept 
the sight draft and make entry on stub of check book, similar to that for transaction No. 33. 
Enter in your cash book, debiting Const. Fischer No. 2 advance payment. Enter the goods on 
a loose leaf, with the stencil mark F-2. Opposite Advances , in the debit column, write the 
amount of the sight draft you have accepted. 

For an explanation and illustration of the order bill of lading, see Introductory Course, pages 94-96. 
Note carefully the difference between the form and use of the order bill of lading and the straight bill. 

When goods are shipped under an order bill of lading, the usual notice of the arrival of the goods 
is sent and the receipt forms are made out by the railroad company, but the goods are delivered only on 
presentation of the bill of lading, properly indorsed, and, of course, the payment of freight charges, if any. 

In No. 51, after you had accepted the draft, which in this case was equivalent to issuing your check 
for the amount, the bank would indorse the bill of lading to E. H. Reed & Co., which would give you title 
to the goods, and enable you to get them from the railroad company. 

No. 52 Memorandum from Rice & Pond. 

No. 53 Render an account sales to Rice & Pond for consignment No. 2, which is sold 
out, and send them a check for the net proceeds. 

Close the consignment in your consignment ledger, and remove the leaf from the book. 

No. 54 This draft on you by the Western New York Preserving Co. is presented by the 
bank. Accept the draft. 

No. 55 Fill this order from Theo. Crosby & Co., taking apples, $3.75 per bbl., butter, 
24j£ per lb., from Mason’s consignment No. 2, and XXX flour, $5.25 per bbl., XX flour, $5 
per bbl., Pastry flour, $5.50 per bbl., from your own merchandise. Do not fail to write the 
stencil number of the consignment opposite the items in the sales book that are taken from 
Mason’s consignment, and enter these amounts on the credit side of the loose leaf in the con¬ 
signment ledger. (Calculate butter at 60 lb. per tub.) 

No. 56 Sales of the day from the blotter. 

No. 57 Cashier’s payments for the day. Be careful in calculating your discounts. 

Prove the cash, and post. 


July 24 

No. 58 Invoice from Dock & Coal Co. 

No. 59 Check from F. H. Larkin & Co., with an account sales of shipment sent them on the 
17th. Enter in your cash book, placing the amount in the Shipments column, and post to 
shipment ledger in credit column. Close this shipment account. 

No. 60 Check from the National Market Co. in payment of bills of July 17 and 18, less 
3% on the part of the bills which have been sold from your own merchandise. 

No. 61 Take from your Cash Drawer, D. W. Perry & Co.’s acceptance at sixty days 
from July 18, for $220.25, and have it discounted at the bank. (Prepare discount slip as 
usual.) Notice that the draft is not discounted for 60 days, but for the time it has to run. 
See that the net proceeds are placed to your credit in your bank pass book. Enter in your 
cash book and on the left-hand stub of your check book. 

No. 62 Memorandum of goods received, freight paid, from the Western New York Pre¬ 
serving Co. 

No. 63 Render an account sales of consignment received from the Iowa Packing Co., 
and remit net proceeds by New York draft, for which you will pay 25^ (see No. 21). Make 


210 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


the check for amount of draft and exchange. Indorse the draft properly, and inclose it with 
the account sales in an envelope addressed to the Iowa Packing Co. 

No. 64. Sales as per blotter. 

No. 65. Ship to Warren Jordan, New York, to be sold on commission, 150 bbl. apple* 
at $2.75, 800 bu. potatoes at 55^. 

No. 66 Cashier’s payments for the day. 

Prove the cash, and post. 

July 2* 

No. 67 Memorandum of shipment by the Iowa Packing Co., under an order bill of 
lading, with the accompanying sight draft, which is presented by the Traders Bank (see No. 54). 

No. 68 Memorandum of shipment from Edwin Mason & Co. (M-3). 

No. 69 Send 500 bu. potatoes at 55^, and 10 tubs butter at 21j£, to F. H. Larkin & Co., 
Northboro, to be sold on commission. Take these goods from your own merchandise. 

No. 70 Deposit all checks on hand. 

No. 71 Order received from D. W. Perry & Co. Fill order as usual, taking apples at 
$3.50 and butter at 22j£ from H-l; plums at $1.50 and peaches at $1.75 from W-2. 

No. 72 Sales from blotter. 

No. 73 Cashier’s payments for the day. Make out a check for the bill for building stable, 
and pay the freight bills in cash. Do not forget to charge each consignment and each ship¬ 
ment with its freight bill. To what account would you charge the check given for building 
the stable? 

No. 74 Render an account sales of Edwin Mason & Co.’s consignment No. 2, and send 
them the net proceeds by New York draft. Make out a check for the amount of the draft 
and 50^ exchange. 

Prove the cash, and post. 

July 26 

No. 75 Invoice from Gillette & Hennigan. 

No. 76 Fill D. W. Perry & Co.’s order, taking oranges at $6, lemons at $4.75, pineapples 
at $1.80, from your own merchandise; plums at $1.50, cherries at $1.50, from W-2. 

No. 77 This order is received from G. H. Tucker & Co., and, as requested, you will draw 
a sight draft for the amount of the bill. Fill the order, less 3%, taking goods from your own 
merchandise — pineapples, $1.80; lemons, $4.75; cheese, 15^; ketchup, $2.50. 

Since the sale is, in effect, for cash, you allow them a discount of 3%. Draw the draft 
and place it in your Cash Drawer for deposit at the close of the day with other drafts and 
checks received. Enter the amount in your cash book the same as though you had received 
a check, and check off the debit entry in the sales book and the credit entry in the cash book. 
Deduct the discount in the sales book, and extend the net amount in the merchandise column. 

No. 78 Memorandum of sundry small sales made from your own merchandise (see 
No. 16). 

No. 79 Letter from Russell & Birkett, inclosing a draft. Accept this draft. 

No. 80 Check from the City Hotel Co. in payment of bills of July 16 and 17. 

No. 81 Cashier’s payment. Pay the freight on Gillette & Hennigan’s invoice in cash. 

No. 82 Deposit sight draft of G. H. Tucker & Co. and check of City Hotel Co. Enter 
the sight draft on your deposit slip under Checks, with the explanation, Sight draft, opposite 
the amount. 

The acceptance of the sight draft on G. H. Tucker & Co. by the bank as a deposit was by agreement 
with the cashier. The draft is treated as a check, and if not paid will be charged back to you by the bank. 


ADVANCED COURSE 211 

This is not a common practice, but where the depositor is responsible and his account is satisfactory, some 
banks will extend this courtesy. 

Prove the cash, and post. 

July 27 

No. 83 Return 10 tubs of butter received from Chas. Hunter & Co., as it is found upon 
examination to be unfit for your trade. This transaction requires an entry in your consignment 
ledger. Under Sales write 10 tubs butter returned, 600 lb. Write a letter to Hunter & Co., tell¬ 
ing them why the goods have been returned. 

No. 84 Render an account sales to Rice & Pond for consignment No. 3. Send them a 
check for the net proceeds. 

No. 85 Sales from blotter. 

No. 86 Cashier’s payments. Pay these amounts in currency. 

No. 87 Check from A. W. Noone & Co. for invoice of the 18th inst. 

No. 88 Check from E. B. Dean & Co., in payment of bill of the 17th, less 3% discount 
on that part of the bill taken from your own goods. 

No. 89 Render an account sales to Chas. Hunter & Co., and place the net proceeds 
to their credit. Enter in Packages Returned column of the account sales register the 10 tubs 
butter returned July 27. 

No. 90 Account sales of shipment to J. M. Marsh & Co. 

No. 91 An account sales from W. A. Simonds & Co., New York, with cashier’s check 
for your net proceeds. A cashier’s check answers the same purpose as a bank draft. Note 
closely the form of the check. 

No. 92 Your acceptance of July 17, favor Fischer Flour Co., is due this day at Traders 
Bank. 

No. 93 Deposit all checks and cash on hand. Prove the cash, and post all unchecked 
original entries. Before proceeding further, turn to pages 189 and 199 and carefully read the 
explanations given there of the various books used in this set. 

Closing Books of Original Entry. — Close cash book, sales book, purchases journal, ship¬ 
ment ledger, and account sales register in accordance with the models previously described. 

Final Posting. — You will now post to the general ledger the footings of the special columns 
of your books of original entry in accordance with the following instructions. 

Cash Book. — Debit Side. Post the total of the Net Receipts column to the debit of Cash; 
the total of the Discount on Sales column to the debit of Discount on Sales; the total of the 
Shipments column to the credit of Shipments; the individual items in the Net Receipts column 
should be posted to the credit of the individual accounts. The total of the Sundry Dr. column 
is checked and not posted. 

On the Credit Side of cash book post the footing of the Net Payments column to the credit 
of the Cash account; post the footing of the Discount on Purchases column to the credit of 
Discount on Purchases; post the Shipments column to the debit of Shipments; post the Con¬ 
signments column to the debit of Consignments; the individual items in the Net Payments 
column will be posted to the debit of the individual accounts. The total of the Sundry Cr. 
column is checked and not posted. 

Sales Book. — Post the footing of Sales from Consignments column to the credit of Con¬ 
signments ; post the footing of the Sales column to the credit of Sales; post the individual 
items to the debit of the individual accounts. 

Purchases Journal. — Post the footing to the debit of Purchases; post the several items 
to the credit of the respective accounts. 


212 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Ward & Gray 


Profit and Loss Statement, July 1-July 31, 19— 


Shipments (net proceeds received) 

$2800. 


Deduct: 

Net Cost of Shipments : 

Goods shipped 

$4115.42 


Less: 

Cost of Goods in hands of Consignees 7/31 

1445.75 2669.67 


Profit on Shipments 

$4461.27 

$130.33 

Merchandise (net sales) 


Less: 

Cost of Sales: 

Inventory 

$2400. 


Purchases 

4444.30 


Freight-In. 

115.30 


Total Cost 

$6959.60 


Less: 

Inventory 7/31/19— 

2747.38 4212.22 


Gross Profit on Sales 


249.05 

Commissions earned 

$122.47 

146.18 

Charges earned 

23.71 

Gross Profit from Operations 


$525.56 

Deduct: 

Operating Expenses: 

Salaries 

$60. 


Insurance 

4.32 


Office Supplies used 

5.00 


Depreciation on: 

Real Estate 

150. 


Furniture and Fixtures 

25. 


Horse and Wagons 

25. 

269.32 

Net Profit from Operations 


$256.24 

Add: 

Other Income: 

Discount on Purchases 


365.68 

Total Income 


$621.92 

Deduct: 

Other Charges: 

Discount on Sales 

$150. 


Discount on Notes 

2.40 

152.40 

Net Profit — July 1 to July 31, 19— 


$469.52 

Distributed as follows: 

Interest on Capital 

Geo. Ward 

$13.26 


A. H. Gray 

12.71 $25.97 


Geo. Ward 1/2 net balance" 

$221.78 


A. H. Gray 1/2 net balance 

221.77 443.55 

$469.52 


Shipment Ledger. — Post the footing of the Mdse, column to the debit of Shipments and 
to the credit of Purchases. 

Account Sales Register. — Post the footing of the Amount to be Posted column to the 
debit of Consignments, and the Commission and Charges amounts to the credit of their re¬ 
spective accounts. 

Your posting is now completed, but you should check back, to be certain that there are 
no errors or omissions. 

Take a trial balance and submit it to your teacher for approval. 















ADVANCED COURSE 


213 


No. 94 Bank voucher slip. Foot your pass book, deduct the amount of the slip, with 
proper explanation, using red ink, and balance and rule up the book. 

Take your checks from the file and compare them with the slip, place a check mark against 
each item as it is found to agree with the check. Return the unpaid checks to the file. 

Cancel the paid checks by writing Paid across the face of each, and then compare them 
with the amounts on the check stubs, checking each amount for which you have a canceled 
voucher. The unchecked amounts represent unpaid checks. Place the canceled checks in 
Voucher File. Reconcile your bank balance. (See Reconciliation of Bank Balance, page 199.) 

Instead of writing up the depositor’s pass book in detail, as was formerly the general custom, many 
banks now list the charge items on a strip of paper by means of the adding machine, and enter only the 
total and the balance in the pass book. Other banks render regular monthly statements to their depos¬ 
itors, the forms of which vary. Some of these statements are in envelope form, and show on the outside : 
the deposits in detail; dates of same; total credits, including previous balance; total debits; and present 
balance. The vouchers are inclosed in the envelope, but no detailed statement of them is given. Another 
form of statement, and one which is much appreciated by depositors, is similar to the monthly statement 
of business concerns. The charge items are listed in detail and footed under Vouchers, on the left side 
of the form, and the credits, balance, deposits — dates and amounts — are listed under deposits on the 
right side. This side also shows the total credits, total debits, and balance. This work is also done on 
the adding machine, and the vouchers are returned with the statement. 


Inventories, July 31, 19— 


50 

bbl. Apples, 

$3.50 

16 bx. Lemons, 

$4. 

94 

doz. C. Beans, 

1 . 

5 “ Oranges, 

5. 

7 

tubs Butter, 420 lb., 

.21 

72 doz. C. Peas, 

.85 

27 

bx. Cheese, 2735 lb., 

.11 

3 bbl. S. Pickles, 

7. 

72 

bx. C. Corn, 

1.05 

3 “ Sw. Pickles, 

9. 

105 

bbl. 3X Flour, 

4.50 

489 bu. Potatoes, 

.62^ 

70 

“ 2X Flour, 

4.25 

1 doz. Pineapples, 

1.20 

55 

“ Pastry Flour, 

4.75 

133 “ C. Tomatoes, 

.95 

30 

doz. Ketchup, 2. 

Other inventories: Real estate, estimated to be worth $9700; Unearned 

premium on in- 


surance policy, $45.83 ; Office supplies on hand, $35; Furniture and fixtures, valued at $225; 
Horse and wagon, valued at $292.50. 

Unsold shipments, valued at cost as shown by the shipment ledger, $1278.10. 


Closing the Books 

Financial statements will now be prepared and the ledger closed as of July 31. Following 
is the work required in the order in which it should be done. 

1 Profit and Loss Statement, July 1-July 31, 19—. Prepared from the trial balance 

of July 31 and from above inventories. (Use model form on page 212.) 

2 Balance Sheet, July 31, 19—. (Use model form on page 214.) 

3 Closing entries, July 31, 19—. (Use model form on page 215.) 

4 Post closing entries and balance and rule general ledger accounts. 

5 Take a proof trial balance. 


214 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Ward & Gray 

Balance Sheet, July 31, 19— 
Assets 


Current Assets: 


Cash 

$1795.60 



Notes Receivable 

375. 



Accounts Receivable 

3446.48 



Consignments Advances 

520. 



Merchandise Inventory 

2747.38 



Shipments Inventory 

1445.75 

$10330.21 


Fixed Assets: 




Real Estate 

$7050. 



Horses and Wagons 

250. 



Furniture and Fixtures 

175. 

7475. 


Expense Items Paid in Advance: 




Insurance Unexpired 

$45.68 



Office Supplies on Hand 

30. 

75.68 





$17880.89 

Liabilities and Capital 



'Current Liabilities: 




Notes Payable 

$4000. 



Accounts Payable 

8217.37 



Total Liabilities 


$12217.37 


Capital: 




Geo. Ward Net investment 

$2652. 



Interest on capital 

13.26 



1 /2 net profit 

221.78 $2887.04 



A. H. Gray Net investment 

$2542.00 



Interest on capital 

12.71 



1/2 net profit 

221.77 2776.48 

5663.52 


Total Liabilities and Capital 



$17880.89 


According to agreement, each partner is to receive interest on his net investment at the 
legal rate. This equalizes in part their investments and also makes it possible to show on the 
records how much of the net gain as shown by the statement is creditable to the capital itself, 
and how much to the handling of that capital in the conduct of the business by the firm. Find 
the interest on E. H. Reed’s investment as shown by his account in the ledger for 31 days, the 
length of time it has been invested in the present business. Find the interest on Student’s 
investment in the same manner. Enter the amounts of these interests on the debit side of the 
statement as shown in the form. Deduct the sum of the interests from the gain from the busi¬ 
ness, and the remainder will be the net gain. Divide this gain equally between the partners 
and close the statement. 

Statement of Resources and Liabilities. — Make a statement of resources and liabilities of 
the business, using the above model as a guide. 

The debit side of this statement comprises cash and the various accounts having inven¬ 
tories, followed by Notes Receivable, Accounts Receivable, and Consignments. Accounts 
Receivable includes all personal accounts showing debit balances. 

The credit side of the statement contains the debts due by the firm on notes and on ac¬ 
counts, the latter being designated as Accounts Payable, also the present worth of the partners 

Submit your statements to your teacher for approval before closing the ledger. 

Hand your books and papers to the teacher for inspection. 

















ADVANCED COURSE 


215 


Model Closing Entries, July 31, 19— 


Purchases 

Inventory 


To close inventory of 

July 1 to Purchases a/c 

2400. 

2400. 

Purchases 

Freight-In 


To transfer into Pur¬ 
chases account the cost 
of freight 

115.30 

115.30 

Inventory 

Purchases 


To bring on the books 
the inventory of July 31 

2747.38 

2747.38 

Sales 

Purchases 


To transfer the cost of 
sales from Purchases ac¬ 
count to Sales account 

4212.22 

4212.22 

Sales 

Profit and Loss 


To transfer the gross 
profit on sales to the 

Profit and Loss Account 

249.05 

249.05 

Shipments 

Profit and Loss 


To transfer the profit 
on shipments to profit 
and loss 

130.33 

130.33 

Commission 

Charges 

Profit and Loss 


To close into profit and 
loss 

122.47 

23.71 

146.18 

Profit and Loss 

Salaries 

Insurance 

Office Supplies 

Real Estate 

Horses and Wagons 
Furniture and Fixtures 


To transfer all operating 
expenses to profit and loss 

269.32 

60. 

4.32 

5. 

150. 

25. 

25. 

Discount on Purchases 

Profit and Loss 


To transfer other income 
to profit and loss 

365.68 

365.68 

Profit and Loss 

Discount on Sales 
Discount on Notes 


To transfer other charges 
to profit and loss 

152.40 

150. 

2.40 

Profit and Loss 

Interest on Ward & 
Gray’s Capital 

Geo. Ward 

A. H. Gray 

13.26 

12.71 

To close profit and loss 
to the proprietors’ ac¬ 
counts 

469.52 

25.97 

221.78 

221.77 


EXERCISES 

Note. — Accounts sales in these exercises are to be prepared on foolscap paper, properly ruled, and 
the trial balances and statements on loose journal paper. The forms and dates are to be supplied by the 
student. 

1 Received from Klem & Co., Boston, to be sold on their account, 50 crates Bermuda 
onions; paid freight and cartage, $5.90; sold 20 crates at $2.60; 30 crates at $2.50; com¬ 
mission, 5%; storage, $2.50. Proceeds credited, subject to sight draft. Render account sales. 

2 Received from C. L. Johnson & Company, Charlotte, to be sold on their account, 50 
bbl. Baldwin apples, 75 bbl. Greening apples. Paid freight and cartage, $16.32; sold 25 
Baldwins at $4 a bbl.; 20 at $4.25; 5 at $4.50; sold 50 Greenings at $4.50; 25 at $4.75; 
commission, 5%; cold storage, $6.25; cooperage, $1. Proceeds remitted by N. Y. draft, 
less exchange 50^. Render an account sales. 

3 Shipped to James Goodman & Son, Chicago, to be sold on your account, 40 crates 
celery at $1.50, freight prepaid, $7.50. Sold 10 crates at $2.50; 24 at $2.25 • 5 at $2; 1 crate 


216 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


spoiled, no sale. Commission, 4%; guarantee, 1%; cartage, 75^. Proceeds received by 
Chicago draft, less exchange 50$£. Prepare the invoice of shipment and the account sales, 

4 The Empire Trading Company, Cincinnati, received from the Newman Mfg. Com¬ 
pany, Little Falls, to be sold on commission, 100 cases, assorted prints. Freight and cartage, 
$37.50, paid by the consignee. The goods were sold in four lots, as follows : 25 cases at $24.75; 
25 cases at $25.25; 30 cases at $25; 20 cases at $26.25. Commission, 7J%; insurance, \%; 
advertising, $5. Advance payment by sight draft, $150, and proceeds paid by check. Render 
an account sales. 

5 Giglio & Segni, commission merchants, New York, received from Castelli & Pietro, 
Messina, Italy, to be sold on their account and risk, 100 boxes fancy oranges, 100 boxes choice 
lemons. The consignees paid customs duties, etc., $57.50; freight and drayage, $5.35. They 
sold the oranges at $3.50 per box, and the lemons at $3.25 per box. Their charges were : com¬ 
mission 5%, insurance $2.50, storage $2.25, guarantee 1%; and they remitted the net proceeds 
in Palermo funds, less] exchange, 9.75 liras. Render an account sales in liras. (The value of 
a lira is 19.3 cents in United States money.) 

6 Beebe & Coleman conduct a produce commission business. Each invested $2500, 
and they share the gains equally. Beebe receives a salary of $80 per month, during the five 
“ season ” months, for extra services. The withdrawals on private account are limited to 
$100 a month, excepting during the “ season '' months, when Beebe may draw $150 a month. 
The partners' personal accounts are to be adjusted annually before Dec. 31. The books are 
to be closed annually Nov. 30. The investment accounts are to remain stationary. Fol¬ 
lowing is an abstract of the general ledger, Nov. 30, 19—, of the above firm : Credits. — Com¬ 
mission, $4895.84; Sundry Charges, $143.92; Accounts payable, $146.97; W. H. Beebe, 
$2500; T. R. Coleman, $2500. Debits. — Furniture and Fixtures, $575; Expense, $1782.67; 

# Accounts receivable, $2652.18; Advances, $346.26; W. H. Beebe, personal, $1475; T. R. 
Coleman, personal, $850. The cash in bank and in safe is $2505.62; the furniture and fixtures 
are valued at $525. 

From the above data make a trial balance, and prepare statements of losses and gains and 
of resources and liabilities. 

7 The statement of losses and gains of Drake & Smith, commission merchants, Dec. 31, 
19—, shows the following : Gains. — Commission, $3796.86; Cartage, $312.40; Discount, 
$91.54; Shipments, $1320.06; Merchandise, $4652.72. Losses. — Rent, $1200; Salaries, 
$1875; Insurance, $63.75; Freight, $119.26; Interest, $31.52; Furniture and Fixtures, 
$75; General Expenses, $87.49. Rule an account form on a sheet of cap paper and show the 
Loss and Gain account of the above firm as it would appear after the books had been closed 
for the year ending Dec. 31, 19—. The partners share the gains in the proportion of Drake 
f and Smith f. 

8 Using the model cash book, shown on pages 196 and 197, as a guide, rule a form of 
cash book on loose journal paper which you think would meet the requirements of a purely 
commission business, where the conditions are as follows: Numerous cash payments are made 
for freight, cartage, and expense items; a general expense and separate freight and cartage 
accounts are kept; a separate ledger is kept for customers' accounts, and payments on these 
accounts are made chiefly in cash. Explain the advantages which you believe your form of 
cash book possesses over the ordinary form. 

9 Assume that you have accepted a position as bookkeeper for E. A. Raschke, produce 
commission merchant, and, upon taking charge of the books, you find the following condi¬ 
tions to exist: (1) A trial balance has not been taken in several months; (2) the cash has 
not been balanced in over two weeks; (3) the bank pass book has not been written up for 


ADVANCED COURSE 


217 


nearly three months; (4) the books consist of a receiving book, an ordinary form of sales book, 
an ordinary form of cash book, and a ledger; (5) besides handling produce on consignment, 
the proprietor buys and sells other products on his own account. 

State what steps you would take to meet the first three conditions; what changes you 
would recommend in the books, either in form or number or both; state ivhat accounts you 
would keep in the general ledger, so that the proprietor could, by reference to it, easily and 
quickly determine at any time the particulars regarding his business which a commission mer¬ 
chant should know. 

The following exercises are given for practice in schools which have adding machines. 

10 Prove the charge postings to your accounts receivable accounts by listing on the add¬ 
ing machine, first the charge sales from your sales book, and second, the debit footings of the 
accounts, and comparing the footings of the two lists. 

11 Prove the credit postings to your accounts receivable accounts by listing, first, the 
credit payments from the cash book, and second, the credit footings of the accounts, and com¬ 
paring the footings of the two lists. 

12 Prove the credit postings to your accounts payable accounts by listing, first, the pur¬ 
chases from purchases journal, and second, the credit footings of the accounts, and comparing 
the two footings. 

13 Prove the debit postings of your accounts payable accounts by listing, first, the debit 
payments from the cash book, and second, the debit footings of the accounts, and comparing 
the two footings. 

14 Prove the accounts receivable accounts by comparing the difference between the 
debit and credit footings of the lists obtained in exercises 10 and 11 with the balance of the 
accounts receivable, as shown by your statement of resources and liabilities. 

15 Prove the accounts payable accounts by comparing the difference between the foot¬ 
ings of the lists obtained in exercises 12 and 13 with the balance of the accounts payable, as 
shown by your statement of resources and liabilities. 

QUESTIONS 

1 In most lines of business, how are goods usually marketed? 

2 In what other way do some producers and manufacturers dispose of their products? 

3 Define commission business, and state how a commission merchant receives payment for his 
services. 

4 Define consignor, consignee, consignment, shipments. 

5 Describe the method of marking goods so that it may be known to what consignment they belong. 

6 Give the rule for debiting and crediting Shipments. 

7 Give the rule for debiting and crediting Consignments. 

8 What is the consignment ledger, and what are the advantages of the loose-leaf method of keep¬ 
ing accounts with consignments ? 

9 Define advances, and state where they should be entered in the consignment ledger. 

10 When all the goods of a consignment have been sold and the entries of sales made in the con¬ 
signment ledger, how should you proceed to close the account in the consignment ledger? 

11 What extra columns appear in the cash book of this business ? 

12 What are the advantages of having special columns in the cash book? 

13 When should a special column be provided for an account ? 

14 How are merchandise discounts posted? 

15 What items appear in the Shipments column on the debit side of the cash book? On the credit 

side? 

16 What items should appear in the Consignments column of the cash book? 

17 What is the object of the shipment ledger? 


218 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


18 What special columns appear in the sales book? 

19 How are sales from consignments indicated in the sales book? 

20 Describe the account sales register. What accounts are posted from this book ? 

21 What is a controlling account, and what is the object of such an account? 

22 Name the controlling accounts used in this set. 

23 Of what ledgers are the controlling accounts in this set an abstract ? 

24 How do you prove a ledger which has a controlling account ? 

25 Is this an absolute proof of the accuracy of the work in both the ledger and the controlling ao 
eount ? 

26 Where should you post the footing of the Consignments column from the credit side of the cash 
book? 

27 Where should you post the footing of the Sales from Consignments column of the sales book ? 

28 How should you post the Amounts to be Posted column of the accounts sales register? 

29 What is meant by “net proceeds”? 

30 Give a full explanation of the Shipments account. 

31 What result does the Shipments account show? 

32 Explain fully the Consignments account. 

33 What does the balance of the Consignments account show ? 

34 Why must Consignments account balance when all consignments have been disposed of? 

35 Why does the Consignments account never show a gain ? 

36 What accounts show the profits from consignments? 

37 What is the object of keeping a separate account with Freight In? 

38 How should this account be closed ? Why ? 

39 How may copies of business papers be quickly made? 

40 Explain two methods of indexing ledgers and impression books. 

41 How was the bank account kept in this business? 

42 In what ways may detailed records of deposits be kept ? 

43 Explain how you would reconcile the bank balance. 


WHOLESALE DRY GOODS BUSINESS 


Wholesaling. — Buying and selling merchandise in bulk, — that is, by the dozen, gross, 
case, or lot, etc., —instead of by the single^ article, is called “ wholesaling.” It is a form of 
business activity which is between manufacturing, or producing, and retailing, and is an im¬ 
portant department of commerce. Some manufacturers also do a wholesale business, selling 
direct to the retail trade. 

The wholesaler generally buys from the producer and sells to the retailer. Sometimes he 
buys from middlemen, called jobbers, selling agents, and commission merchants, who act as 
agents for others, generally manufacturers or producers. Middlemen derive their revenue 
or profit chiefly from commissions on sales made for others, while wholesalers obtain their revenue 
chiefly from sales of merchandise which they have previously bought. The principal revenue 
account of middlemen is “Commissions,” and that of wholesalers is “ Merchandise ” or “ Trad¬ 
ing Account ” which represents it. Buying and selling merchandise is called “ trading,” and 
the amount of merchandise sold during a fiscal or business period, figured at prime cost, is called 
the “ turnover.” ' ' 

While there are many lines of wholesaling, some of which have more or less special char¬ 
acteristics, certain forms of accounting records are used which are common to all. The dry 
goods business has been selected for this work, to illustrate wholesaling practices and account¬ 
ing, because of its representative character, both as regards commodities and records. 

Books Kept in Wholesale Business. — The books kept in a wholesale dry goods business do 
not differ in principle from those used in other lines of business; but most progressive houses 
make use of modern labor-saving forms of account keeping, including special column books, 
impression sales books, loose-leaf sales sheets, loose-leaf ledgers, etc., wherever practicable. 

Books to Keep. — The books which you will keep in this work are the journal, sales book, 
cash book, purchases journal, sales journal, general ledger, sales ledger, purchases ledger, and 
notes receivable and notes payable books. 

Journal. — On the debit side, the journal here used is provided with the following columns : 
Notes Receivable, Accounts Payable, General. All notes received are entered in the Notes 
Receivable column. The several items in this column are checked but not posted. The foot¬ 
ing of the column is posted to the debit of Notes Receivable in the general ledger. (See Model 
Journal, page 220.) 

When a creditor is paid by note, he is charged in the column entitled “Accounts Payable.” 
The several items in this column are posted to the debit of the proper accounts in the purchases 
ledger. The footing of this column is posted to the debit of the controlling account, Accounts 
Payable, in the general ledger. 

Debit journal amounts other than those provided for above are entered in the General 
column. The several items in this column are posted to the debit of the proper accounts in 
the general ledger. The footing is not posted. 

219 


220 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Journal, August 1, 19— 


Notes Rec. 


Accts. Pay. 


General 


L.F. 


General 


Accts. Rec 


Notes Pay. 


Edward Deane has this day been 
admitted into partnership with Geo. 
W. Barnes and C. M. Lyon under 
conditions shown in articles of co¬ 
partnership executed on same date. 

The investment of each partner and 
the assets and liabilities of the firm 
are shown in the following entries, 
and a new set of books is opened 
showing the following balances. 


3200 


5320 

24800 

25900 

15 

3000 

13000 

600 

250 


50 


V 


Cash in bank 5200 

“ safe 120 

Inventory 
Notes Receivable 
Accts. Rec. 

Interest On Notes Receivable 
Furniture 
Real Estate 
Horses & Wagons 
Insurance 
Accts. Pay. 

Notes Payable 

Interest On Notes Payable 

Discount 

Geo. W. Barnes capital 
C. M. Lyon 
Edward Deane “ 


24500 


140 

6 

15751 

18687 

5000 


12000 


1600 


9 

B. Martin & Co. note at 4 m. on 
V Notes Pay. acct. 


1600 


845 


345 


4390 


20 


20 


40 


125 50 


1725 


50 


4390 

1725 


79001 40 


15 

Notes Rec. in full to date by 

D. H. Cross & Co. 4 m. note 

22 

Notes Rec. dft. at 10 da. for 

Curtis, Hines & invoice 7/4 
Co. 

29 

R. H. White & Co. R. B. p. 175 
Returned Pur¬ 
chases 


31 


845 20 


345 20 


125 


50 


13600 


Notes Receivable, 
Accts. Payable, 
Notes Payable, 
Accts. Receivable, 


13600 

1190 


79001 


40 


40 


1190 


40 


13600 



































































ADVANCED COURSE 


221 


The journal is provided with the following columns on the credit side: General, Accounts 
Receivable, Notes Payable. Whenever a customer gives a note on account, he is credited 
with the amount of the payment in the column entitled “ Accounts Receivable.” The several 
items in this column are posted to the credit of the proper accounts in the sales ledger. The 
footing of this column is posted to the credit of the controlling account, Accounts Receivable, 
in the general ledger. 

When a note is issued on account, the credit entry is made in the Notes Payable column. 
The footing of this column is posted to the credit of Notes Payable in the general ledger. The 
several items are checked but not posted. 

All credit journal amounts other than those provided for above are entered in the Gen¬ 
eral column. The several items in this column are posted to the credit of the proper accounts 
in the general ledger. The footing is not posted. 

The special columns, Accts. Pay. and Notes Rec. on the debit side of the journal, and Accts. 
Rec. and Notes Pay. on the credit side, are footed at the end of the month, and the amounts 
are transferred to the General columns, and the proper ledger titles are written opposite them 
in the explanation column. The journal is then ruled up (see page 220). 

Cash Book. — On the debit side the cash book is provided with the following columns: 
Sales Ledger, General Ledger, Sales Cr., Discount on Sales, Net Receipts. (See form, page 222.) 

When a customer pays on account, the amount of the invoice is entered in the column 
entitled Sales Ledger. If discount is allowed, the amount of the discount is entered in the 
column headed Discount on Sales. The amount of cash received is entered in the Net Receipts 
column. All cash sales are entered in Sales Cr. column. All other receipts are entered in the 
General Ledger column. The net amount received is entered in the Net Receipts column in 
every case. 

Note that the sum of all credit columns is equal at all times to the sum of all debit columns. 

When posting the left-hand page of the cash book, the items in the first column are posted 
in detail to the credit of the individual account in the sales ledger; the items in the general 
column are posted to the credit of the proper accounts in the general ledger. Note that these 
two columns are the only ones posted in detail. At the end of the month, the columns are 
footed and posted, as illustrated in the form, to the general ledger. 

On the credit side the cash book is provided with the following columns: Purchases 
Ledger, General Ledger, General Expense, Discount on Purchases, and Net Payments (page 223). 

This side is handled similarly to the debit side. All entries in the first three columns are 
debits and those in the last two are credits. 

Only the first two columns are posted in detail. All other columns are posted at the end 
of the month as illustrated in the form. 

At all times the balance of cash may be found by subtracting the Net Payments column 
from the Net Receipts column. 

Proving Cash. — The cash should be proved daily by comparing the total amount 
of cash in safe and in bank with the balance as shown in the cash book. 

Purchases Journal. — This book contains a record of the invoices of goods bought. It 
is the ordinary form of two-column journal, one column for daily items and the other for daily 
and other totals. When an invoice reaches the bookkeeper, it is entered in the purchases 
journal. Only the date, serial number or department letter, name of the creditor, and amount 
of the invoice appear in this book. The serial number or department letter is next written on 
the invoice, and it is then posted to the proper account in the purchases ledger. The several 
items in the purchases journal are not posted, but the footing is posted at the end of the month 


222 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Cash Receipts 


Date 

L.F. 

Accounts Cr. 

Explanations 

Sales 

Ledger 

General 

Ledger 

Saleh Cr. 

Discount 
, on Sales 

Net 

Receipts 

19— 















Aug 

1 


Balance 

2268.95 









' 2268 

95 


1 


Notes Receivable 

Warren 6/30 



1200 






1200 

i 


4 


C. H. Barton 

6/10 less 2% 

498 






9 

96 

488 

04 


Gf 


D. B. Lyon 

7/6 less 3% 

600 






18 


582 


6 

V 

Sales 

S. B. 

• 




242 

78 



242 78 


7 


w H. Wray 

Net 

244 








244! 




Notes Receivable 

Leach 6/9 dis. 



412 

50 



*2 

15 

410 35 


0 


Interest on Notes Rec. 

above 



4 

13 





413 


10 


Ferry Bros. 

7/10 less 3% 

915 






27 

45 

887j 55 


12 

V 

Sales 

S. B. 





412 

60 



412 60 


14 


T. M. Hunt & Co. 

8/10 less 5% 

720 






36 


684 



15 


Notes Rec. 

Harper 5/15 



928 

70 





928 

70 




Accounts Rec. (Cr.) 


2977 












V 

General Ledger (Cr.) 




2545 

33 


_ 








Sales (Cr.) 






655 

oo 








Dis. on Sales (Dr.) 








91 

41 






Dis. on Notes Rec. (Dr.) 








2 

15 






Cash (Dr.) 










6084 

15 



Balance Aug. 1 










2268 

95 

i 













10 

Aug 116 


Balance 1 3873.50 








1 

8353j 



to th® debit of Purchases account, and to the credit of Accounts Payable account, in the gen¬ 
eral ledger. 


JoMMZne** »o, Jt.Pntt a Trias. 



Sold to 


Ur. H. H. Holmes, 

Heshanticut, 


December 31, 1909. 


CX. 


2J02 

1201 

1J°5 

1801 

605 

3901 

4705 


1 Pr. Shoes 8225 
3 Hdkfs. 

3i Yds. Ribbon 
1 Pocket Book 

1 Pr. Curtains 

2 Films 
12 Mounts 
1 Soap 

1 T. Powder 

6 Orange Sticks 

2 Tooth Brushes 

3 Books 
1 Book 

1 Pc. Ribbon 
1 Tennis Racquet 


Taisting 



5 00 

35 

8 00 
16 
30 

08 

25 

50 

M 

58 

’ 3 


8 50 
1 00 

1 52 

98 
8 48 


5 00 

11 


4 00 
X 32 
1 50 
60 
9 48 


98 

8 48 


~ww 


Sales Journal. — This book contains 
a record of the sales. Only the date, 
name, and amount of the sale appear in 
this book. The complete record of the 
sale appears on the duplicate bills, from 
which the posting is done and the entries 
in the sales journal are made. The form 
of the sales journal is the same as that of 
the sales book used in August, except 
that it contains no cash column, and it is 
footed at the end of the month, posted and 
closed the same as that book, the entry 
being “ Accounts Receivable ” (Dr.), 

“ Sales ” (Cr.) for the amount. The sales 
journal will be used in the September work. 

Bill and Charge System. — Instead 
of making bills singly with the pen or 
typewriter, they can be made in duplicate, 
triplicate, etc., on a billing machine or a- 
typewriter, by the use of carbon sheets, 
and one of the copies used as the original 
entry, or posting medium, thereby dis¬ 
pensing with the necessity of the sales 
book. This is called “ the bill and charge 


































































ADVANCED COURSE 


223 


Cash Disbursements 


Date 

L.F. 

Accounts Dr. 

Explanations 

Purchases 

Ledger 

General 

Ledger 

General 

Expense 

Discount 

on 

Purchases 

Net 

Payments 

19— 















Aug. 

1 


Rent 

August 



150 






150 



1 


R. H. White & Co. 

7/10 less 3% 

400 






12 


388 




V 

General Expense 

exchange 





1 

20 



1 

20 


3 


H. W. Little & Co. 

7/20 less 5% 

750 






37 

50 

712 

50 


4 


Notes Payable 

chgd at Bk. 



1420 

50 





1420 

50 




Interest on Notes Pay. 



14 

21 





14 

21 



V 

General Expense 

exchange 






75 




75 


6 


C. W. Carter & Sons 

7/6 less 2% 

920 

50 





18 

41 

902 

09 


8 


Office Supplies 

stamps, etc. 



12 

46 





12 

46 


9 


Freight-In. 

to date 



72 

50 





72 

50 


12 


Edw. Hayes & Co. 

7/12 less 5% 

845 

20 





42 

26 

802 

94 


15 

V 

General Expense 

coll. & each 





2 

45 



2 

45 




Accounts Payable 

(Dr.) 

2915 

70 











V 

General Ledger 

(Dr.) 



1669 

67 










General Expense 

(Dr.) 





4 

40 








Dis. on Purchases 

(Cr.) 







110 

17 






Cash 

(Cr.) 









4479 

60 




_ , f in safe 

61.50 














Balances . , . 

1 m bank 

3812. 









3873 

50 

- 













8353 

10 


system.” The original bill is sent to the customer, the duplicate to the bookkeeper, and the 
triplicate is placed in a binder in the shipping department, for reference. From the dupli¬ 
cate, the entry is made in the sales journal, as explained above, and after the serial number 
has been written on the bill, the account in the sales ledger is charged from it, after 
which the bill is filed in a numeric binder. The duplicate bills support the records in 
the sales journal. 

Notes Receivable and Notes Payable Books. — These books will be kept as auxiliary books; 
that is, a record of all notes received and issued will be kept, but no posting will be done there¬ 
from. Some bookkeepers post the items directly from the notes receivable and notes payable 
books to their respective accounts, and the monthly footings to the Notes Receivable and Notes 
Payable accounts in the general ledger. 

Ledgers. — Three ledgers are used in this work, viz., purchases ledger, sales ledger, and 
general ledger. The purchases ledger contains the accounts of all persons from whom goods 
are purchased on account. The sales ledger contains the accounts of all persons to whom goods 
are sold on account. Both these ledgers are provided with special columns. 

The purchases ledger and sales ledger are subsidiary to the general ledger, and are con¬ 
nected with it by their controlling accounts, Accounts Payable, and Accounts Receivable. 
The balance of the Accounts Payable account in the general ledger must equal the sum of the 
balances of the accounts in the purchases ledger. The balance of the Accounts Receivable 
account in the general ledger must equal the sum of the balances of the accounts in the sales 
ledger. 

The general ledger contains all the accounts of the business which are not kept in the 
purchases ledger or the sales ledger, together with the controlling accounts of those ledgers. 

The Balance Ledger. — In this month’s work you will use what is known as the “ balance 
ledger ” for the form of your purchases ledger and sales ledger. See form on page 224. 












































224 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Warner, DeForest & Co., Amsterdam, N.Y. 


Date 

Descrip¬ 

tion 

Terms 

Fol. 

Debit 

Balance 

Credit 

Date 

Fol. 

Explanation 

19 

_ 










19 

_ 



July 

1 

Bal. 

J 

1 

812 

70 

1 812 

70 

1 812 

70 

July 

10 

12 

c 


9 

S. B. 

5% 10 ds. 

7 

215 

70 

2 


2 215 

70 


19 

14 

c 


14 

ii 

2/20 Net 30 

ii ii 

9 

168 

70 

4 


3 210 

25 


21 

14 

c 


18 

a 

11 

415 

60 

5 


4 168 

70 


23 

16 

c 


20 

ii 

Net 60 ds. 

12 

388 

70 



5 415 

60 


28 

18 

Note 4 mos. Int. 


20 

a 

2/10 

12 

412 

20 

3 


6 412 

20 


30 

18 

C 


21 

a 

Cash 

13 

210 

25 

8 









26 

a 

Net 30 ds. 

14 

160 

40 

549 

10 








The headings of the columns of the balance ledger explain their uses. The Debit and 
Credit columns are placed near together, with the Balance column between. This form of 
subsidiary ledger is specially adapted for use in any business where the terms are specific and 
induce or require prompt settlement of every sale or purchase. When any particular bill 
has been paid, instead of ruling off the items, a small figure is written opposite each of the 
amounts. (See model form, above.) A glance at the account shows what bills remain unpaid, 
and in taking a balance of the account only these amounts are considered. The balance of 
an account is written in the Balance column at the end of the month, and should agree with 
the monthly statement sent to the debtor or received from the creditor. Only the balance 
at the end of the current month should be included in the schedule of balances or proof of the 
balance ledger. 

Sectional Sales Ledgers. — When it is not convenient or desirable to keep all of the ac¬ 
counts with customers in one sales ledger, these accounts may be divided, and each division 
kept in a separate or sectional sales ledger. The accounts may be divided alphabetically, 
geographically, or in any other way that may be desired, and the separate ledgers will be known 
by the accounts which they contain, as Sales Ledger A — D, Ohio Sales Ledger, City Sales 
Ledger, Dept. G. Sales Ledger, etc. Each sales ledger will have its own sales book or books, 
and may have a separate controlling account, or all of them may be controlled by the main 
controlling account, Accounts Receivable account. 

Self-Balancing Ledgers. — A subsidiary ledger, from which a trial balance can be taken 
without reference to its controlling account in the general ledger, is called a self-balancing ledger. 
A subsidiary ledger may be made self-balancing by constructing in it a controlling account, 
and posting to that account the amounts which are posted to the controlling account in the 
general ledger from the original books of entry, such as the footings of the sales book or purchases 
book, and of the accounts receivable or accounts payable columns in the cash book. Since 
the items represented by the footings have been posted to the proper sides of the separate 
accounts in the subsidiary ledgers, these footings must be posted to the opposite sides of the 
controlling accounts in the subsidiary ledgers. 

The advantage of the self-balancing ledger is that the assistant bookkeepers can prove 
their ledgers at the end of the month, or at other times, without having to refer to the general 
ledger, or to obtain from the head bookkeeper the balances of their controlling accounts. 
























ADVANCED COURSE 


225 


The title of the controlling account in a subsidiary ledger may be the same as that in the 
general ledger, as Accounts Receivable, or Sales, for the sales or customers’ ledger; or it may 
have the title Controlling Account, or the title General Ledger. 

In the work for September the student will convert his purchases ledger and his sales 
ledger into self-balancing ledgers, by constructing a controlling account in each of these ledgers, 
under the title Controlling Account, and after posting the footings of the original books of 
entry to the proper controlling accounts in the general ledger, as heretofore, he will re-post 
these footings to the opposite sides of the controlling accounts in the subsidiary ledgers, check¬ 
ing the amounts posted in the usual way. The two check marks against each footing will show 
that the amount has been posted to both controlling accounts. 

Private Ledger. — When it is desired not to have the general ledger show the capital 
accounts of the proprietors, and other accounts which may be considered of a private nature, 
these accounts are kept in a subsidiary ledger, called a “ private ledger,” and a controlling 
account, Private Ledger, is opened in the general ledger. The private ledger and the private 
books, which are used in connection with it, are usually kept by a member of the firm, or by 
the confidential man of the concern. 

Accounts Kept. — The accounts kept in any business will depend chiefly upon its char¬ 
acter and size, and the detailed information which the proprietor desires to have the books 
show. 

It is desirable to have the number of accounts in the general ledger as few as possible, consistent 
with good accounting, and at the same time have proper regard for the classification and details of the 
business., This can be accomplished by the use of special books of original entry, and subsidiary or under¬ 
lying ledgers. 

Analyzing Accounts. — When more detailed information is desired regarding any phase 
of a business than is shown by the footings or balance of the account which it represents, this 
may be obtained by “ analyzing the account.” This is done by drawing off the items in the 
account on an “ analysis sheet,” where they are classified and entered in separate columns, 
headed according to the information which it is desired to obtain. 

Division of Accounts. — Accounts are usually divided into three general classes; namely, 
Real accounts, Personal accounts, and Nominal accounts. 

Real accounts are accounts which represent property or values, such as Cash, Inventory, 
Real Estate, etc. Personal accounts are accounts with debtors and creditors of the business, 
and include the capital account, which, although not a liability, represents the amount for 
which the business is accountable to the proprietor. Notes Payable, Notes Receivable, Mort¬ 
gages Payable, Mortgages Receivable accounts are also classed as Personal accounts. Real 
accounts and Personal accounts are called “ continuing accounts,” because they are not opened 
or set up for any definite period. 

Nominal accounts are accounts which are opened or raised for temporary purposes, and 
are closed at the end of a business period, such as Rent, Salaries, Insurance, Taxes, Purchases, 
Sales, Profit and Loss, etc. 

Most nominal accounts show profits or losses, but the subdivisions of the merchandise 
account show “ activities,” namely, the trading of the business, and the main account shows 
the profit or loss. 

Nominal accounts possess the elements of real accounts when they represent assets or liabilities, 
such as interest accrued and not paid, unearned insurance, and property on hand at the beginning of a 
fiscal period which was previously charged to nominal accounts, as office supplies, shipping supplies, etc. 


226 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Accounts to Construct. — In addition to most of the accounts with which you are already 
familiar, you will construct other real and nominal accounts in this business. These will be 
indicated and explained as they arise in the work. 

The general ledger will be both opened and closed by passing the entries through the 
journal. 

Assets and Liabilities. — The assets of a business consist of all property and rights belong¬ 
ing to the business which have a money value. The liabilities of a business are the amounts 
due to outside parties, as distinguished from its obligations to the proprietors or the stock¬ 
holders. The assets and liabilities of a business may be divided into fixed assets and floating 
assets, fixed liabilities and floating liabilities. 

Fixed assets are the permanent assets which are necessary for conducting the business, 
such as the furniture and fixtures of a store, plant and machinery of a factory, office equip¬ 
ment, etc. Floating or current assets are the assets which are constantly changing in quan¬ 
tity and value as the result of the operations of the business, such as cash, merchandise, notes 
receivable, accounts receivable, supplies, etc. These assets may be sold or realized without 
interfering with a business or its operations. Floating assets are also called circulating assets. 
Floating assets which consist of cash, or can be readily converted into cash, such as checks, 
demand notes, securities which have a ready market, are called quick assets; also called liquid 
assets. 

Fixed liabilities include obligations which are not payable for a long time, such as mort¬ 
gages, mortgage bonds, etc., and are liens on some of the fixed assets. Floating or current 
liabilities are the claims of creditors which will have to be met within a short time, as notes 
payable, accounts payable, interest accrued but not due, etc. Liabilities which are hot abso¬ 
lute, but which may come into existence as the result of the happening of some events, are called 
contingent liabilities. 


PRELIMINARY WORK 

August 1 , 19— 

You have entered into partnership this day with Henry W. Taylor and Clark F. Wood, 
who have been conducting a wholesale dry goods business under the name of Taylor & Wood. 
The name of the new firm will be Taylor, Wood & Co., and its purpose will be to purchase and 
develop the business of the firm of Taylor & Wood. 

In accordance with the Articles of Copartnership, which were drawn up in triplicate by 
an attorney, and executed this day by the partners, the partnership is to continue five years, 
unless sooner dissolved by mutual consent of the partners. 

You are to invest $2500 cash in the business, and Mr. Taylor and Mr. Wood are to invest 
their respective interests in the business of Taylor & Wood, as they appear on the books of that 
firm when closed as of July 31, 19—. 

The new firm is to take over the assets, and to assume the liabilities of the old firm at 
their book values. 

By “book values” is meant the balances of the accounts as shown by the ledger, no allowances being 
made for possible failure of debtors to pay in full, nor for depreciation of property. 

The partners are to be allowed salaries, monthly, for their services, as follows: Taylor, 
$150; Wood, $125; yourself, $175. 

The books are to be closed annually, as of July 31, during the life of the partnership, and 
at the termination of the same. 


ADVANCED COURSE 


227 


At the time of closing the books, each partner shall be allowed interest at 6% on his invest¬ 
ments and charged interest at the same rate on his withdrawals. No member of the firm shall 
draw to exceed $250 per month for his personal use. 

The profits and losses of the business are to be shared equally by the partners. ,• 

No. 1 This cash represents your investment, which you will turn over to the business- 
by placing it in the Cash Drawer. The proper record will be made when the books are opened- 
Place the notes receivable on hand in the Cash Drawer also. 

The assets and liabilities of the firm of Taylor & Wood, at the close of business July 31, 
19—, and the interests of the partners are shown by their Balance Sheet and supporting sched¬ 
ules, which are given below and on page 228. 


Balance Sheet 

Taylor & Wood, July 31, 19— 

ASSETS 


Cash in Commercial Bank, 


$ 5860. 

Notes Receivable per schedule No. 3, 

2102.45 

Interest, accrued on above 


17.24 

Accounts Receivable per schedule No. 1, 

20442.75 

Inventory, merchandise “ 

No. 5, 

26609.96 

Shipping Supplies 

No. 9, 

292.07 

Office “ “ 

No. 8, 

169.31 

Insurance, unearned premiums, 


275. 

Horses and Wagons per schedule No. 7, 

750. 

Furniture and Fixtures “ 

No. 6, 

2500. 

Real Estate, flat #74 Chestnut St., 


12000. 


Total assets, 


$71018.78 


LIABILITIES 

Notes Payable per schedule No. 4, 

Interest, accrued on above, 

Accounts Payable per schedule No. 2, 

Total liabilities, 
Net assets, 


$10500. 

128.25 

19264.69 

' $29892.94 

$41125.84 


Capital 

H. W. Taylor capital a/c, 

C. F. Wood “ “ 

Present worth, 


$16431.95 

24693.89 _ 

$41125.84 


Schedule 1. Accounts Receivable, per Sales Ledger 


Harris & Smith, 139 Main St., City, 
Brown & Wilson, Troy, 

Jas. H. Wood & Son, Newton, 

L. H. Parker, Lima, 

Sibley & Co., Gardner, 

W. B. Snow, Akron, 

Ingham & Case, Alton, 

B. C. Wiley, Waverly, 

J. G. Smith, Ottawa, 

W. O. Harrison, Randolph, 

Lewis W. Chase, Jackson, 

Carlton, Sons & Co., Dansville, 


$4577.94 

1324.11 

1016.42 
1203.86 
2943.01 

536.88 

66.35 

122.44 

914.13 

1682.12 

3695.42 
2360.Q7 

$20442.75 







228 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Schedule 2. Accounts Payable, per Purchases Ledger 


Sibley, Lindsay & Curr Co., New York, $10184.23 

Burke, Fitz Simons, Hone & Co., Boston, 2837.90 

Gimbel Bros., Philadelphia, . 4628.71 

Granite Mills, Fall River, Mass., 904.85 

Little Falls Woolen Co., Little Falls, N. Y., 709.00 


$19264.69 


Schedule 3. Notes Receivable 

Note of C. F. Jenkins for $407.32, dated May 18, payable at First National Bank, Marietta, 
Ohio, drawn at 3 months with interest, at 6%. 

Note of Wilson & Randolph for $654.90, dated June 14, payable at Merchants Bank, 
Buffalo, N. Y., drawn at two months with interest, at 6%. 

Note of Warren & Co. for $325.00, dated July 23, payable at Traders Bank, Scranton, 
Pa., drawn at sixty days without interest. 

Note of Isaac Holman & Sons for $715.23, dated June 1, payable at Second National 
Bank, Newark, N. J., drawn at three months with interest, at 6%. 

Interest accrued on the above, $17.24. 


Schedule 4. Notes Payable 

Note in favor of Commercial Bank for $10000, dated May 20, drawn at four months with 
interest, at 6%. 

Note in favor of Little Falls Woolen Co. for $500, dated April 24, drawn at four months 
with interest, at 6%. 

Interest accrued on the above, $128.25. 

When a legal change is made in the ownership of a business it marks the end of a current period, 
and the books must be closed for that period. When such a change does not permanently interrupt the 
progress of the business, it is customary to continue the use of the old books. Sometimes, however, ad¬ 
vantage is taken of such a situation to effect a partial or complete change in the system of records and 
accounts. In this work, it will be assumed that a new set of books is opened, and an improved system of 
accounts is installed. 

Opening the Books. — You will now frame an opening entry in the journal to represent 
the assets and liabilities of the business, and the investments of the partners. The assets 
which Mr. Taylor and Mr. Wood have contributed, and their net capital, together with the 
liabilities assumed by the new firm, are shown in the balance sheet of Taylor & Wood and 
the accompanying schedules, given on page 227 and above. Your investment is the amount 
of the cash in safe. (See form of opening journal entry, page 220, and note carefully all of the 
details.) Inventory account will represent the merchandise inventories in this work. 

Supporting Records. — You will note that the opening entry in the journal contains only 
the several items which represent the assets and liabilities. 

Make an entry in the cash book, and on the stub of the check book, for the cash in bank. 
Enter the cash which you have invested, writing for explanation, investment per J, and check 
the entry, as the credit to your account will be posted from the journal. These entries support 
the record in the journal. Rule off the journal. (See page 220.) 

Enter the notes receivable and notes payable as per schedules, in notes rec. and pay. books. 

Open accounts in the general ledger and post the opening journal entry. Allow one- 
third of a page to each account. Open the partners’ capital accounts on page 1, and leave 



ADVANCED COURSE 


229 


page 2 for their personal or drawing accounts, to be opened later. For explanation write 
Inventory, for accounts with furniture and fixtures, horses and wagons, interest, real estate, 
insurance, and shipping supplies. For all others, excepting Inventory account, write balance. 
No explanation is necessary for the Inventory account. 

Arrange an index for the three ledgers on the index pages of blank No. 2, and index your 
general ledger accounts. 

Open accounts in the sales ledger as per schedule of accounts receivable, and enter the 
balances. Allow one-fourth of a page to each account. Index the accounts. 

Open accounts in the purchases ledger as per schedule of accounts payable, and enter 
the balances, allowing one-third of a page to each account. Index the accounts. 

You have now completed the opening of the books, and the general ledger shows the 
assets and liabilities of the business and the capital or investment of the partners. The pur¬ 
chases and sales ledgers show the accounts with creditors and debtors in detail, and support 
the controlling accounts in the general ledger. 

Test the accuracy of your work by taking a trial balance of the general ledger, and a proof 
of each of the other ledgers. Carry the amount of cash from the cash book to your trial bal¬ 
ance. Compare the footing of the balances of the purchases ledger with the balance of Accts. 
Payable account, and the footing of the balances of the sales ledger with the balance of the 
Accts. Receivable account, to see if they agree. 

The books are now in proper form to receive the records of the current business. 


TRANSACTIONS 

August 1 

No. 2 Invoice of W. 0. Harrison, Randolph, being overdue, draw a sight draft on him 
for the amount, S750. On the back of the draft make indorsement as follows: 

Pay to the Commercial Bank, or order, 

Taylor, Wood & Co., 

Per (Your name). 

(Sign the firm name to all vouchers, per your own name.) 

Place the draft in Vouchers for Others, or leave it at the bank for collection. 

No. 3 Give a check for the amount of this bill, from Tower Mfg. and Stationery Co. 
(Place the bill in your Voucher File.) 

No. 4 Make a bill for this order from B. C. Wiley, and enter in sales book. Note the 
terms. Your teacher will assign you a price list from the lists on pages 230, 231. 

Indicate on the bills how the goods were shipped, using the names of the railroad trans¬ 
portation companies, and express companies which operate through your city or town; as, 
Wabash R.R., Merchants Despatch, American Exp., etc. 

The orders in this work provide excellent practice for students who are proficient with the type¬ 
writer, and the bills may be made on the machine instead of with the pen, at the option of the teaeher. 

Terms, 6% 10 days, 5% 30 days. 5 pcs. Monument cotton, 62, 59, 58, 64, 63£ yds. 2 
pcs. creton plaid, 41, 38 yds. 3 pcs. French crepon, 36, 40, 37 yds. 5 pcs. wash silk, 484, 
49, 51, 52, 511 yds. 2 pcs. Duchess satin, 48, 51 yds. 10 doz. lace. 

In the dry goods business there are two kinds of terms for different classes of goods regular and 
net; and no bills are to run more than sixty days, unless they are “X” bills or carry post datings. An 


230 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Price Lists for 




1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

1. 

Amoskeag Denim . . . 


yd. 

.122 

.25 

.13 

.24 2 

.23 2 

.24 

.14 

.23 2 

.14 2 

.23 

2. 

Blk. Venetian .... 


u 

1.25 

1.37 

1.24 

1.36 

1.23 

1.35 

1.22 

1.34 

1.21 

1.33 

3. 

Blue Flannel .... 


“ 

.37 

.24 2 

.36 2 

.25 

.26 

.25 2 

.35 2 

.26 

.35 

.26 2 

4. 

Broadcloth. 


a 

4.13 

4.01 

4.14 

4.02 

4.15 

4.03 

4.16 

4.04 

4.17 

4.05 

5. 

Creton Plaid .... 


“ 

.12 2 

•121 

.12 3 

• 12| 

.12 1 

• 12f 

.12| 

.131 

.131 

.13 3 

6. 

C. Lining. 


“ 

.07 2 

.07 3 

.07 1 

.071 

.07f 

•07| 

•07| 

.081 

.081 

.08 l 

7. 

Cashmere. 


u 

.60 

.58 

.62 

.56 

.64 

.54 

.66 

.52 

.68 

.50 

8. 

Coates Thread .... 


doz. 

.55 

.54 

.36 

.53 

.37 

.52 

.35 

.51 

.38 

.50 

9. 

Duchess Satin .... 


yd. 

2.00 

1.95 

1.90 

1.98 

1.96 

1.94 

1.92 

1.88 

1.86 

1.84 

10. 

Fruit of Loom Sheeting . 



.08 2 

.08 1 

,09 2 

.08 3 

.09 1 

.09 3 

.10 1 

.07 3 

.10 2 

.07 1 

11. 

French Crepon.... 


“ 

1.75 

1.77 

1.73 

1.79 

1.71 

1.81 

1.69 

1.83 

1.67 

1.85 

12. 

Kersey, 54 in. 


«< 

1.15 

1.16 

1.34 

1.17 

1.33 

1.18 

1.35 

1.19 

1.32 

1.20 

13. 

Monument Unblchd. Cotton 

a 

.06 2 

.061 

.06 1 

.06| 

.06 3 

•06| 

.061 

•051 

.051 

.05 1 

14. 

Oxford Gray Homespun 


“ 

1.00 

1.05 

1.10 

1.02 

1.04 

1.06 

1.08 

1.12 

1.14 

1.16 

15. 

Plain French Poplin . . 


«« 

1.20 

1.18 

1.22 

1.16 

1.24 

1.14 

1.26 

1.12 

1.24 

1.10 

16. 

Pique Muslin .... 


“ 

.15 2 

.15 3 

.14 2 

.15 1 

.14 3 

.14 1 

.13 3 

.16 1 

.13 2 

.16 3 

17. 

Smoked Pearl Buttons . 


gro. 

.75 

.77 

.73 

.79 

.71 

.81 

.69 

.83 

.71 

.85 

18. 

Surah Silk. 


yd. 

.48 

.50 

.46 

.52 

.44 

.54 

.42 

.56 

.40 

.58 

19. 

Sateen . 


<( 

.10 2 

.10 1 

.10 3 

.101 

.10f 

• 10| 

.101 

.091 

.091 

.09 3 

20. 

Storm Serge, Navy Blue 


“ 

.75 

.73 

.77 

.71 

.79 

.69 

.81 

.67 

.83 

.65 

21. 

Talbot Flannel . . . 


“ 

.27 

.28 

.39 

.29 

.38 

.30 

.37 

.31 

.36 

.32 

22. 

Torchon Lace .... 


doz. 

.65 

.70 

.75 

.80 

.66 

.71 

.76 

.67 

.72 

.77 

23. 

Velveteen (248) . . . 


yd. 

.35 

.25 

.34 

.26 

.33 

.27 

.32 

.28 

.31 

.29 

24. 

Whipcord. 


“ 

1.10 

1.05 

1.00 

.95 

1.09 

1.04 

.99 

1.08 

1.03 

.98 

25. 

Wash Silk. 


“ 

.50 

.60 

.51 

.59 

.52 

.58 

.53 

.57 

.54 

.56 

26. 

Corduroy. 


“ 

.75 

.74 

.63 

.73 

.64 

.72 

.65 

.71 

.66 

.70 


Note. — Where fractions are not expressed in full in the price lists, fourths are understood. 


“X” bill is a bill on which an extension of time is allowed, usually sixty days beyond the time allowed 
by the usual terms. A post-dated bill is a bill which is dated ahead, after the delivery of the goods. Goods 
(subject to post-dating) delivered after December 1, carry April 1 dating, 2%, 10 days net. 

Regular terms are 5% 30 days (expressed 5/30) and 6% 10 days. Net terms are 2% 10 days and 1% 
30 days. 

If a regular bill is paid in thirty days, 5% discount will be allowed from the amount of the bill; and, 
if paid in ten days, 6% will be allowed. If a net bill is paid in ten days, 2% will be allowed, and if paid 
in thirty days, 1%. Extra and post-dated bills are subject to but one discount, namely, 2/10. 

In this work, the terms will be given for each sale. 

Before an order is sent to the shipping department to be filled it is passed or approved by the credit 
department, and the approval is indicated on the order, usually by means of a rubber stamp containing 
the date, the word Approved, and the initials of the credit man or of his assistant who approved the 
order. 

Only the actual goods shipped are billed, and the bills are made out from the shipping records or 
order sheets, which show the quantities shipped, the routing of the goods, etc. When an order is not 
filled complete, owing to lack of stock, the unshipped items are indicated on the shipping record or order 
sheet. These unfilled parts of orders are known as “back orders” or “B O’s.” The unshipped items 
are indicated by the letter T (transfer) placed before each item. Back orders are handled the same as 
regular orders when the goods required to fill them are in stock. 

It will be assumed that all out-of-town orders are shipped by freight under straight bills of lading 
made out by the shipping clerk, unless otherwise stated, and that all freight, both inward and outward, 
is hauled in the firm’s wagons. 

Freight companies, unlike express companies, do not call for or deliver goods. Therefore, all freight 
packages must be hauled to and from the freight houses of the freight transportation companies. 

































ADVANCED COURSE. 


231 


Dry Goods Business 


*——- 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

1. 

.15 

.222 

.152 

.22 

.21 2 

.16 

.16 2 

.21 

.17 

.20 2 

.172 

.20 

.18 

.192 

.18 2 

2. 

1.20 

1.32 

1.19 

1.31 

1.18 

1.30 

1.17 

1.29 

1.16 

1.28 

1.15 

1.27 

1.14 

1.26 

1.13 

3. 

.34 2 

.27 

.34 

.272 

.28 

.332 

.33 

.28 2 

.32 2 

.29 

.32 

.292 

.31 2 

.30 

.31 

4. 

4.18 

4.06 

4.19 

4.07 

4.20 

4.08 

4.21 

4.09 

4.22 

4.10 

4.23 

4.11 

4.24 

4.12 

4.25 

5. 

■ 13| 

.13 2 

.13f 

.13 1 

• 111 

•m 

.ll 3 

.ll 1 

• Ilf 

• Ilf 

.ll 2 

.iot 

.10 3 

.10f 

.10 2 

6. 

.08 3 

•08| 

•08| 

.08 2 

.091 

.091 

.09 1 

.09 3 

.09| 

.09 f 

.092 

.lot 

.10 1 

.10f 

.10 2 

7. 

.70 

.59 

.61 

.57 

.63 

.55 

.65 

.53 

.67 

.51 

.69 

.73 

.72 

.74 

.71 

8. 

.39 

.49 

.40 

.48 

.41 

.47 

.42 

.46 

.43 

.45 

.44 

.40 

.38 

.39 

.42 

9. 

1.82 

1.80 

1.78 

1.76 

1.75 

1.74 

1.72 

1.70 

1.68 

1.62 

1.64 

1.56 

1.58 

1.66 

1.60 

10. 

.10 3 

.07 1 

.IP 

.08 1 

.ll 2 

.08 2 

.ll 3 

.08 3 

.09 3 

.09 1 

.092 

.10 1 

.10 3 

.10 2 

.07 3 

11. 

1.65 

1.76 

1.74 

1.78 

1.72 

1.80 

1.70 

1.82 

1.68 

1.84 

1.66 

1.62 

1.63 

1.61 

1.64 

12. 

1.31 

1.21 

1.30 

1.22 

1.29 

1.23 

1.28 

1.24 

1.27 

1.25 

1.26 

1.30 

1.32 

1.31 

1.28 

13. 

•05f 

.052 

•05| 

.05 3 

.07| 

.071 

.07 1 

.07 3 

.07| 

•07| 

.072 

.081 

.08 1 

•08| 

.08 2 

14. 

1.18 

1.20 

1.22 

1.24 

1.25 

1.26 

1.28 

1.30 

1.32 

1.38 

1.36 

1.44 

1.42 

1.34 

1.40 

15. 

1.22 

1.08 

1.24 

1.06 

1.26 

1.04 

1.28 

1.02 

1.30 

1.21 

1.29 

1.23 

1.27 

1.25 

1.05 

16. 

• 13 1 

.16 3 

.12 3 

.15 3 

.122 

.152 

.12 1 

.15 1 

.14 1 

.14 3 

.142 

.13 3 

.13 1 

.132 

.16 1 

17. 

.73 

.87 

.71 

.89 

.69 

.91 

.67 

.93 

.65 

.74 

.66 

.72 

.68 

.70 

.90 

18. 

.47 

.57 

.45 

.55 

.43 

.53 

.41 

.51 

.60 

.39 

.38 

.37 

.63 

.61 

.62 

19. 

.09 1 

.09| 

•09f 

.092 

.081 

.081 

.08 3 

.08 1 

© 

00 

.08 f 

.08 2 

.071 

.07 3 

•07| 

.072 

20. 

.76 

.66 

.78 

.68 

.80 

.70 

.82 

.72 

.63 

.84 

.85 

.86 

.60 

.62 

.61 

21. 

.35 

.33 

.34 

.26 

.41 

.25 

.42 

.24 

.43 

.39 

.34 

.29 

.43 

.37 

.28 

22. 

.68 

.73 

.78 

.69 

.74 

.79 

.81 

.87 

.82 

.86 

.83 

.85 

.84 

.72 

.69 

23. 

.30 

.36 

.50 

.37 

.49 

.38 

.48 

.39 

.47 

.40 

.46 

.41 

.45 

.42 

.44 

24. 

1.07 

1.02 

.97 

1.06 

1.01 

.96 

.94 

.88 

.93 

.89 

.92 

.90 

.91 

1.03 

1.06 

25. 

.55 

.49 

.35 

.48 

.36 

.47 

.37 

.46 

.38 

.45 

.39 

.44 

.40 

.43 

.41 

26. 

.67 

.69 

.68 

.76 

.61 

.77 

.60 

.78 

.59 

.63 

.68 

.73 

.59 

.65 

.74 


For example: 12 2 means 12? ; .07* means .07|; .10 1 means .10*. 


Daily Posting. — The accounts in the Sales Ledger should be posted to date, in order to 
have them show their true current condition. 


August 3 

No. 5 Your traveling man, H. R. Judson, draws $200 cash for expenses. 

August 4 

No. 6 Give check to C. H. Garfield, Agt., $300, for rent for August. 

No. 7 Sold to Geo. M. Walker, City, for check, 1 piece Oxford gray homespun, 50 yd. 
3 pcs. storm serge, 43, 45, 46 yds. 1 piece Duchess satin, 50 yds. 3 pcs. surah silk, 49J, 41|, 
43 yds. 

Make entry in the cash book, crediting Sales in special column. Enter sale in sales book, 
and extend total into Cash column; check the entries. 

No. 8 Check from L. H. Parker in full of invoice of July 18, $826.30, less 2% discount. 

Enter on debit side of cash book as follows: $826.30 in Sales Ledger column, amount of 
discount in Discount on Sales column, and amount of check in Net Receipts column. 

No. 9 Deposit cash $2000, and checks of L. H. Parker and Geo. M. Walker. 

You will keep your bank account on the stub of your check book, the same as you did in the Com¬ 
mission Business. 


























232 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


August 6 

No. 10 Make a check in favor of Little Falls Woolen Co. for invoice of July 15, $409, 
less discount 5%. 

Enter on the proper side of the cash book as follows : $409 in Purchases Ledger column, 
amount of discount in Discount on Purchases column, and amount of the check in Net Pay¬ 
ments column. 

No. 11 Note from W. B. Snow, in payment of balance due Aug. 1. 

No. 12 Discount Snow’s note at the Commercial Bank, and receive credit for the pro¬ 
ceeds. 

Find the interest on $536.88 for the full time, and add it to the face of the note; then 
find the discount to maturity on that amount. Enter the face of the note in the General 
Ledger column, the discount allowed in the Discount on Sales column, and the net proceeds 
in the Net Receipts column. Make a separate entry for the interest on the note, placing the 
amount in General and Net Receipts columns. Place a star (*) in front of the discount in the 
Discount on Sales column so as to distinguish it from the sales discounts when analyzing this 
column at the end of the month. (See model form of cash book.) Add the proceeds to your 
bank balance on the left stub of the check book. If there is no bank, make the entry yourself 
in your bank pass book, and place the note in Vouchers for Others. 

Remember to make proper explanation of these entries to support the record in the check 
book. 

No. 13 This is what is known as a shipper’s order (freight C.O.D.). Bill the goods 
to Ingham & Case in the usual way. Note the terms. 4 pcs. Talbot flannel, 44, 40, 45, 47 
yds. 2 pcs. storm serge, 48, 42 yds. 4 pcs. corduroy, 40J, 49, 47J, 39 yds. 2 pcs. surah silk, 
43f, 46i yds. 

No. 13 a. Make a sight draft in favor of the Union National Bank for the amount of 
your bill, pin it to the order bill of lading, and send it to the Union National Bank. (Place 
in Vouchers for Others.) 

For various reasons it is often desirable to make the collection of the purchase price before the goods are 
delivered to the customer. Such shipments by express are sent C.O.D., and by freight, subject to shipper’s 
order. It is customary to collect in this manner when the credit of the customer is limited, or has not 
been fully investigated. 

Returns on freight C.O.D.’s, or shippers’ orders, are usually made by bank draft which is issued and 
remitted by the bank to whose order the goods were consigned. 

When a shipment is made by express C.O.D., the returns are received in currency or by express 
money order, or express check. If the shipment is handled by more than one express company, the re¬ 
turns are made in currency, which is placed in the original C.O.D. envelope and delivered to the shipper 
by the express company which first received the goods. On straight C.O.D.’s, that is shipments which are 
handled by only one express company, the returns are made by express money orders, or special express 
C.O.D. cheeks, and these are sent through the mail in the original C.O.D. envelopes direct to the shippers. 
These money orders and checks can be cashed at the offioes of the express companies, which issue them, 
or they may be deposited in the bank. Except by special agreement between shipper and consignee, 
which must be noted on the C.O.D. envelope accompanying the shipment, express companies will not 
accept payment for C.O.D. shipments in any form other than currency. 

Goods shipped by express may be put up in paper packages, or inclosed in boxes, at the option of 
the shipper; but if shipped by freight, they must be boxed, baled, or crated, unless in car load lots, or 
the nature of the goods is such that they can be handled and transported without being damaged. 


No. 14 Invoice, Burke, Fitz Simons, Hone & Co. Check the items, O. K. the bill, and 
record it in the purchases journal. Note the terms. 


ADVANCED COURSE 


233 


After the invoices have been recorded in the purchases journal they should be filed in such away that 
reference can be readily made to them. Invoices may be filed in the order in which they are passed by the 
bookkeeper, by serial number or department letter, or arranged in sections according to departments, or to 
the names of the creditors. There are various ways in which invoices may be filed and indexed; some¬ 
times they are filed so that the printed name of the creditor is presented to view. A better way, however, 
is to fold the invoice and index the name of the creditor and the date on the upper edge of the back. The 
filing should of course be done in alphabetical order. 

No. 15 Check from Jas. H. Wood & Son in payment of invoice of July 28, $550, less 2% 
discount. (Enter as in No. 8.) 

No. 16 Mr. Taylor draws $200 cash for his private use. 

No. 17 Pay freight bill, $4.36, in cash. 

Transportation companies usually require that freight charges be paid before the goods can be re¬ 
moved from the freight house, but frequently arrangements are made whereby this requirement is waived, 
and the freight charges are paid after the removal of the goods. 

In the absence of an agreement, the transportation charges are paid by the purchaser. 

Payments for freight and cartage on goods bought are properly chargeable to Purchases, as these 
items increase the cost of the goods. Since, however, we want to know both the first cost of the goods 
and the freight paid on them, we charge Purchases for the invoice price from the purchases journal, and 
construct (open) a Freight In account, and charge all payments made on inbound freight to that account 
from the cash book. The amount or balance of Freight In account will be added to Purchases at the end 
of the business period. 

Some bookkeepers add the freight to the invoice, and include the amount in the monthly posting to 
Purchases from the purchases journal. 

August 8 

No. 18 Check from J. G. Smith in full of account to Aug. 1. 

No. 19 Deposit the checks on hand. 

No. 20 Pay Sibley, Lindsay & Curr Co. for invoice of July 28, $3200. Deduct 5% dis¬ 
count, and write a check for the net amount. 

August 10 

No. 21 Cash sales. Perkins & Brown, 50 doz. Torchon lace. 40 gross smoked pearl 
buttons. 

Carroll & Marsh, 1 piece whipcord, 50 yds. 1 piece plain French poplin, 40 yds. 

Strong & Carlisle (check), 3 pieces black Venetian cloth, 36, 38, 40 yds. 2 pcs. broad¬ 
cloth, 55, 59 yds. (See No. 7.) 

Remember to prove the cash daily, and to keep your books posted to date. 

August 11 

No. 22 Check from B. C. Wiley for invoice of July 15, $122.44, less 1% discount. 

No. 23 Two pieces, 43 and 38 yds., of the French crepon received from Burke, Fitz- 
Simons, Hone & Co. on the 6th inst. are found to be damaged. Return the two pieces to them, 
billing at cost price. Write a letter and inclose the bill. 

Enter in the journal, debiting Burke, Fitz Simons, Hone & Co. in Accounts Payable column, 
and crediting Purchase Returns in the General column. For explanation write Returned Pur¬ 
chases, page —. 

In this work merchandise returned by us will be credited to the Purchase Returns account, and 
goods returned to us charged to Returned Sales. 

Separate books, called Return Books, are generally kept for detailed records of goods returned, and 
the entries in these books are transferred to the journal in the form given above. The accounts Purchase 
Returns and Returned Sales are subsidiary to the Purchases and Sales accounts, and are offsets to those 
accounts. 


234 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Forwarding. — When a page of the journal, sales book, sales journal, or cash book is about 
full, rule a red line across the dollar and cent columns on both sides and foot all the columns. 
Place the footings on the first blue line below the red line, with the word “ Ford.” in the explana¬ 
tory space. Transfer the footings to the first blue line at the top of the following page, writ¬ 
ing “ Brot. Ford.” on the same line in the explanatory space. 

August 12 

No. 24 Note received from Brown & Wilson on account. (Notes Receivable and Ac¬ 
counts Receivable columns in journal.) 

No. 25 Pay, by check, invoice of Gimbel Bros., July 15, $1250, less 1%. 

No. 26 Cash sales. National Emporium, 5 pcs. wash silk, 47 J, 49J, 53, 54, 46J yds. 
2 pcs. cashmere, 41, 39 yds. 

Sherman & Co., 2 pcs. French crepon, 43, 37 yds. 6 pcs. No. 248 velveteen, 40, 45, 36, 
38, 45, 46 yds. 

August 13 

No. 27 Ten shares of Wamsutta Mills stock is offered at private sale at $105 per share, 
to close an estate, and the firm has decided to purchase the stock as an investment. Give 
J. L. White, Trustee, a check for the amount of the stock, and place the stock certificate in 
Voucher File. (Wamsutta Mills Stock, General column of cash book.) 

When stocks and bonds are purchased for investment by a mercantile or manufacturing concern, 
an account may be constructed to represent each class or kind of security; as Stocks, Bonds, American 
Locomotive Preferred, U.S. Steel Common, Baltimore & Ohio Gold 4s, or a Securities account may be con¬ 
structed to represent all such investments. 

No. 28 Check received from Sibley & Co. in payment of invoice of July 20, $1540, less 1% 
discount. 

No. 29 The bank has collected your draft of the 1st inst. on W. O. Harrison, $750. 

August 14 

No. 30 Check from Wilson & Randolph for note and interest due to-day. Consult youi 
bill book and mark the note paid. 

No. 31 Salesman’s orders. Note the terms. 

Thompson & Bulkeley, Easton, 6 pcs. Fruit of Loom sheeting, 58, 60, 55, 64, 66, 58 yds. 
8 pcs. Monument cotton, 54, 58, 68, 62, 55, 65, 63, 60 yds. 50 doz. Coates thread. 5 pcs. 
wash silk, 48|, 50i, 52, 48i, 55 yds. 

James H. Wood & Son, Newton, 6 pcs. pique muslin, 68J, 66, 74, 75, 71, 70J yds. 4 pcs. 
broadcloth, 57, 65, 66, 51 yds. 2 pcs. Creton plaid, 40, 42 yds. 25 doz. torchon lace. 

Brown & Wilson, Troy, 5 pcs. sateen, 48J, 47f, 50, 46f, 50 yds. 5 pcs. Crown lining, 
52, 58, 53, 55, 57 yds. 25 doz. Coates thread. 

C. H. Roberts, Westboro, 3 pcs. kersey, 54 in., 45, 48, 43 yds. 20 gross smoked pearl 
buttons. 

No. 32 Invoice of merchandise purchased of the Little Falls Woolen Co. 

No. 33 Mr. Wood withdraws $225 cash for private use. (See No. 16.) 

No. 34 Pay Sibley, Lindsay & Curr Co., by check, for invoice of July 14, $904.85, less 
1% discount. 

No. 35 Deposit cash, $200, and all checks. 


ADVANCED COURSE 


235 


August 15 

No. 36 Pay cash for office supplies, stamps, etc., $18.60. Shipping clerks and porters, 
$70. Office help, $100. 

Shipping Dept. Salaries account represents a selling expense, and Office Salaries account an ad¬ 
ministrative expense. 

No. 37 Invoice of merchandise from Sibley, Lindsay & Curr Co. 

No. 38 Check from Carlton, Sons & Co. for the net amount of invoice of July 16. 

No. 39 Make your check in favor of Little Falls Woolen Co., for invoice of July 29, $300, 
less 2% discount. 

August 17 

No. 40 This remittance is for proceeds of the draft of the 6th inst. on Ingham & Case, 
sent to the Union National Bank for collection. 

No. 41 Cash sales. Geo. M. Walker, City, 50 gross smoked pearl buttons. 1 piece 
Duchess satin, 48 yds. 

H. W. Johnson & Son, City, 1 piece plain French poplin, 50 yds. 1 piece Oxford gray 
homespun, 48 yds. 

No. 42 Pay freight to date on goods received per agent’s request, by check, $13.04. (See 
No. 17.) 

August 18 

No. 43 Check from C. F. Jenkins for note and interest due to-day. 

No. 44 Invoice of merchandise purchased from Granite Mills. 

No. 45 Check from Harris & Smith on account. (No discount.) 

No. 46 Deposit all checks and the bank draft. 

No. 47 Draw $100 in cash for your own private use. 

No. 48 Remit Burke, Fitz Simons, Hone & Co. check in payment of invoice of July 22, 
$2837.90, less 1% discount. 

August 19 

No. 49 Pay freight bill in cash,'$1.19. 

No. 50 W. O. Harrison is unable to settle his account at present, and it has been de¬ 
cided to take his note, with interest, for the balance due from him, $932.12. 

No. 51 Pay cash for 1 ton hay and 5 bu. oats for stable, $13.50. 

August 20 

No. 52 Memorandum order from J. G. Smith. 8 pcs. denim, 381, 39, 41 i, 46, 35, 37f, 
35, 42 yds. 7 pcs. sateen, 48, 45, 46f, 50, 491, 51f, 49 yds. 5 pcs. sheeting, 60, 62, 65, 55, 
59 yds. 8 pcs. Crown lining, 52, 55, 54, 56, 60, 51, 58, 50 yds. 4 pcs. Duchess satin, 481, 
491, 52, 50 yds. 4 pcs. blue flannel, 50, 48, 49, 54 yds. 10 gross buttons. 

No. 53 Salesman’s order from L. W. Chase. 5 pcs. denim, 381, 41, 42, 371, 43 yds. 
4 pcs. blue flannel, 51, 47, 55f, 46f yds. 3 pcs. cashmere, 39, 41, 42 yds. 8 pcs. Fruit of 
Loom sheeting, 58, 60, 60, 61, 57, 63, 65, 55 yds. 7 pcs. pique muslin, 68, 72, 75, 70, 65, 68, 
70 yds. 

No. 54 Give Sibley, Lindsay & Curr Co. your note at 20 days (no interest), $2500. 

No. 55 Pay Granite Mills, by check, for invoice of July 21st, $904.85, less 5%. 

No. 56 Purchase of merchandise from Gimbel Bros. 


236 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


August 21 

No. 67 One piece of kersey, 46§ yds., received on the 20th inst. from Gimbel Bros, is 
damaged. Return it, and render your bill for the same at cost price. (Enter as in No. 23.) 

No. 68 Check from Warren & Co., to prepay their note of $325, less discount to maturity. 
Mark the note prepaid in the notes receivable book. 

Make proper explanations of the entries in the above transaction. 

No. 59 Salesman’s orders. Brown & Wilson, Troy, 2 pcs. Talbot flannel, 45, 42£ yds. 
2 pcs. whipcord, 40|, 43f yds. 5 pcs. Monument cotton, 58, 63, 65, 60, 62 yds. 6 pcs. denim, 
38, 43, 37, 44, 40, 36 yds. 

Sibley & Co., Gardner, 2% 10 days, 1% 30 days, 6 pcs. Fruit of Loom sheeting, 60, 63, 
55, 58, 65, 61 yds. 2 pcs. corduroy, 40, 34| yds. 2 pcs. black Venetian cloth, 38, 33§ yds. 
50 doz. Coates thread. 

B. C. Wiley, Waverly, 6% 10 days, 5% 30 days, 3 pcs. Oxford gray homespun, 48, 50, 
51f yds. 4 pcs. cashmere, 36, 38|, 42, 43J yds. 7 pcs. Crown lining, 50, 54, 58, 52, 55, 51, 
57 yds. 6 pcs. sateen, 45, 50, 49, 53, 48, 49 yds. 50 doz. lace. 


August 22 

No. 60 Check from Jas. H. Wood & Son for invoice of July 21, $466.42, less 5%. 
No. 61 Pay freight bill in cash, $4.58. 


August 24 

No. 62 Note from Lewis W. Chase on account. 

No. 63 Draw a sight draft on Brown & Wilson for invoice of July 15, $504.11, and leave 
it at the bank for collection. 

No. 64 Make a check in favor of Little Falls Woolen Co., in full for your note and interest 
due to-day. Write them a letter and inclose the check. 

No. 65 Remit Gimbel Bros, check for invoice of July 29, $1293.80, less 5% discount. 


August 25 

No. 66 Salesman’s orders. Carlton, Sons & Co., Dansville, 2% 10 days, 1% 30 days, 
2 pcs. broadcloth, 60, 58 yds. 4 pcs. Creton plaid, 37, 39J, 41, 38 yds. 5 pcs. sateen, 47, 
51, 48, 49, 46 yds. 3 pcs. black Venetian cloth, 48§, 35i, 34 yds. 100 gross buttons. 

L. H. Parker, Lima, 30 days net, 2 pcs. whipcord, 40, 42 yds. 6 pcs. Fruit of Loom sheet¬ 
ing, 56, 64, 58, 62, 59, 62 yds. 5 pcs. Monument cotton, 58, 59, 57, 62, 60 yds. 8 pcs. pique 
muslin, 70, 72, 65, 75, 69, 73, 66, 68 yds. 1 piece broadcloth, 60 yds. 

W. B. Snow, Akron, 2% 10 days, 1% 30 days, 6 pcs. wash silk, 47f, 48, 46J, 49, 53J, 55 
yds. 3 pcs. surah silk, 47J, 49f, 52 yds. 3 pcs. corduroy, 36, 38, 37 yds. 6 pcs. Crown lin¬ 
ing, 52, 56|, 55J, 57, 50, 54 yds. 

Levy & Garson, Somersworth, 6% 10 days, 5% 30 days, 90 gross buttons. 40 doz. thread. 
2 pcs. plain French poplin, 48, 42 yds. 1 piece kersey, 40 yds. 

No. 67 Invoice of merchandise purchased of Sibley, Lindsay & Curr Co. 


ADVANCED COURSE 


237 


August 26 

INlo. 68 Discount Chase’s note received on the 24th inst., and have proceeds credited. 

No. 69 Remit Gimbel Bros, your note at 30 days for $2000, to apply on account. (No 
interest.) 

No. 70 Purchase of merchandise from Little Falls Woolen Co. 


August 28 

No. 71 Receive credit at the bank for draft on Brown & Wilson, $504.11, left for collec¬ 
tion Aug. 24th. 

No. 72 Fill the following telephone order received from Harris & Smith, City. Terms, 
2% 10 days, 1% 30 days. 4 pcs. Talbot flannel, 44, 45|, 45, 43 yds. 3 pcs. velveteen, 36, 
32, 38| yds. 2 pcs. unbleached cotton, 60, 62 yds. 3 pcs. Fruit of Loom sheeting, 61, 60, 
60§ yds. 25 gross smoked pearl buttons. 


August 30 

No. 73 Carlton, Sons & Co., Dansville, return, for credit, the goods as per their bill. 
(Returned Sales. See No. 23.) 

When returned goods have been duly accepted, it is customary to send what is called a 
“ credit memorandum ” Send Carlton, Sons & Co., a credit memorandum for these goods. 


Form of Credit Memorandum 


Memorandum of Amount placed to the 


Of Taylor,Wood & Co. 


New York, Aug. 19, 19—. 

CREDIT 

By The H. B. CLAFLIN CO. 


pcs. Blk. Cashmere, 90 yds. 



67 


50 


No. 74 Check from Sibley & Company on account. 

No. 75 Cash sale. W. E. Dennis & Co., City (check), 1 piece storm serge, 48 yds. 4 
pcs. velveteen, 38, 36, 37, 39 yds. 2 pcs. French crepon, 40, 38 yds. 2 pcs. cashmere, 41, 
37 yds. 1 piece surah silk, 48 yds. 3 pcs. wash silk, 49, 56, 45 yds. 

No. 76 Deposit all checks. Draw currency for office use, by check, $100. — (Make the 
check payable to Cash.) 


August 31 

No. 77 Pay freight bill in cash, $3.49. 

No. 78 Pay cash for horseshoeing and repairs on wagon, $5.43. (Delivery Expenses.) 












238 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


r No. 79 Pay H. R. Judson by check for August salary, $150 (see No. 5), and B. F. Nolan 
by check for rent of stable for August, $50. ( Delivery ; Expenses.) 

No. 80 Pay office help, $100, shipping clerks and porters, $70, and teamster, $44.50 in 
oash. 

The wages of the teamster are a delivery expense. 

No. 81 (Student) draws $100 by check for private use. 

A month’s salary is now due each partner, as per partnership agreement. Frame proper 
journal entry. ( Office Salaries.) 

Salaries of the partners are an administrative expense, and do not affect their capital accounts. 

You will now complete the daily posting to the three ledgers, including all the General 
column items in the cash book and journal. Preparatory to posting the monthly footings, 
prove the cash, and rule up and close the books of original entry, as explained and illustrated 
on pages 219 to 223. Be sure that your footings are correct and that the totals of the two sides 
of the journal are alike. 

In constructing new accounts give each account in the sales ledger one-fourth of a page, 
and in the purchases ledger and general ledger, one-third of a page. 

Since all the entries in the sales book and purchases journal, and all the General column 
entries in the journal and cash book, have been posted in the daily posting, there remain to be 
posted only the footings of the purchases journal and sales book, and the footings of the special 
columns in the journal and cash book. These are all general ledger items. 

Purchases Journal. — The closing entry in the purchases journal is Purchases, (Dr.), $-, 

Accounts Payable, (Cr.). Post these items. 

Sales Book. — The closing entry in the sales book is Accounts Receivable (Dr.), $-, 

Sales, (Cr.). Post these items. 

Journal. — The closing entry in the journal contains the debit items, Accounts Payable, 

$-, and Notes Receivable, $-; and the credit items, Accounts Receivable, $-, and 

Notes Payable, $-. Post these items. 

Cash Book. — The closing entries on the debit side of the cash book are the same as shown 
in the model form on page 222. See that the sum of the debit postings to the general ledger 
equals the sum of the credit postings to the general ledger on each side of the cash book. 

Having completed the monthly posting, check the posting, after which pencil foot the 
accounts in the general ledger preparatory to taking a trial balance. 

Trial Balance. — Take a trial balance of the general ledger. Pencil foot the accounts 
in the purchases ledger and sales ledger, extend the balances into the Balance column, and make 
a schedule of balances of each of these ledgers on loose journal paper. After making the sched¬ 
ules, prove them by comparing the footings with the balances of the controlling accounts, 
Accounts Payable and Accounts Receivable, in the general ledger. 

Monthly trial balances are generally taken for the purpose of testing the accuracy of the posting, 
but they may also serve for other purposes. The trial balance, which is taken at the end of a business 
period called the ante-closing trial balance, and the schedule of the inventories of assets and liabilities, 
taken at the same time, contain the data from which the statements of the condition and results of the 
business are made. 








ADVANCED COURSE 


239 


No. 81 a Assuming that the checks issued on Aug. 31 are outstanding, make a bank 
voucher slip, similar to that received in the Commission Business, and after entering the total 
in the pass book, balance and rule up that book, and reconcile your bank balance. 

Dissolution of Partnership. — Mr. Taylor, having decided to retire from business, has 
arranged with his nephew, Mr. Frank H. Taylor, an experienced dry goods man, to take over 
his interest on September 1, and Mr. Wood and yourself have agreed to the arrangement. 

Closing the Books. — In business the books are closed at the end of a fiscal period, usually 
annually, and also in an individual or partnership business, when a legal change takes place 
in the business. 

Inventories. — Inventories are taken for the purpose of ascertaining the quantities or 
values, or both, of property on hand, or of assets or liabilities, which are not shown by the 
books. 

Merchandise inventories are usually taken quarterly, semiannually, or annually at the 
end of a business period. A quarterly or a semiannual inventory of merchandise is usually 
taken for stock purposes, and quantities only are considered. This is necessary when no 
stock books are kept; and when they are kept, the quantities shown by the physical inven¬ 
tories are compared with the quantities shown by the stock books. 

The value of merchandise on hand is usually determined by adding to the invoice cost 
of this merchandise, the cost of acquisition — i.e. freight and cartage. 

When any of the goods on hand have become damaged or unsalable for any reason, 
proper allowance should be made for this condition in the inventory, in order that it will repre¬ 
sent its true asset value for the period. In making all property inventories it is better to be 
conservative in the matter of values rather than to overestimate or inflate them, thereby caus¬ 
ing the records to show fictitious profits. 

In order to determine the true profit of any business period, only the expenses which 
belong to the period should be charged, and only the profits which belong to the period should 
be credited. The expense accounts in the trial balance may show more or less charged or cred¬ 
ited than rightfully belongs to the period and, therefore, adjustments must be made in these 
accounts before the true profits can be ascertained. 

For this reason, inventories are taken of property on hand at the end of the period, which 
has been charged as expenses, such as shipping supplies, office supplies, etc., and accrued assets 
and liabilities are determined, such as interest on notes receivable and notes payable, unpaid 
insurance, rent due and unpaid, etc., and the amounts are carried to their respective accounts. 
Depreciation of property is treated in the same way when no Reserve for Depreciation of Prop¬ 
erty account is maintained. 

Keeping up Stock. — It is important in every mercantile business to have on hand, at all 
times, an adequate stock of goods, with which to fill all orders promptly, and in order to be 
able to do this, it is necessary that some reliable system of reporting stock on hand to the buy¬ 
ing department be maintained. 

The nature of the business and the ease or difficulty with which stock can be replenished 
will, in a measure, determine what system of stock reporting will be required for that business. 
Some concerns can safely rely upon the quarterly inventories for the necessary information 
concerning the condition, as regards quantities of the stock, while others are obliged to have 
monthly, weekly, or daily stock reports. 


240 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Where stock books are kept, reports can be easily made from the books; where such 
records are not kept, it is necessary that the stock clerks, or warehouse clerks, make frequent 
reports of the stock in their departments. This is usually done on stock report sheets or slips, 
which may contain merely the names of the goods and the quantities on hand; or they may 
contain a statement of the minimum and maximum quantities required by the manager, which 
are based on past sales or special demands, and the quantities received since last report, be¬ 
sides any other information that may be desired. 

Stock reporting, also, serves to guard against “ overstocking.” 


Inventories, August 31, 19— 

Merchandise 
Shipping Supplies 
Office Supplies 


$23825.05 

196.50 

182.75 


Adjusting Entries, August 31, 19— 

(a) Set aside a reserve for depreciation of furniture and fixtures of 1% of the cost. 

This is accomplished by an entry in the journal debiting Depreciation of Furniture and 
Fixtures and crediting Reserve for Depreciation of Furniture and Fixtures. 

(b) Set aside a reserve for depreciation of horses and wagons of 1% of the cost. (Make 
a journal entry same as under (a).) 

(c) Insurance expired $7.50. (Debit Insurance Expense and credit Insurance.) 

( d) Interest accrued on Notes Receivable, $12.75. (Debit Interest Accrued on Notes 
Receivable and credit Interest on Notes Receivable.) 

(e) Interest accrued on Notes Payable, $166.67. (Debit interest on Notes Payable and 
credit Interest Accrued on Notes Payable.) 

(/) Rent due on flat, $100. (Debit Rent Receivable and credit Rent Income.) 

( g ) Interest on partner investment and withdrawals, figured at 6% per annum. (Debit 
Interest on Capital and credit each partner’s drawing account with his share.) 

(h) Set aside 1% of Accounts Receivable as a Reserve for Bad Debts. 

Closing the Books 

You will now proceed to close the books as of August 31, 19— and prepare financial state¬ 
ments. Following is the work required in the order in which it should be done. 

1 Make and post adjusting entries. 

2 Take an adjusted trial balance. 

3 Profit and Loss Statement August 1 to August 31, 19—. Prepare from the adjusted 
trial balance and from Inventories. (Use model form on page 241.) 

4 Balance sheet, August 31,19—. (Use model form on page 242.) 

5 Closing entries, August 31, 19—. (In closing the ledger make use of the Trading account 
as explained on page 243. Close the partners’ Personal accounts into their Capital accounts.) 

6 Post closing entries and balance and rule general ledger accounts. 

7 Frame journal entries closing the accrual accounts, Interest Accrued on Notes Receivable, 
Interest Accrued on Notes Payable, and Rent Receivable, and to close Sundry Inventories 
account, transferring the amounts to Interest on Notes Receivable, Interest on Notes Payable, 
Rent Income, Shipping Supplies, and Office Supplies. 

8 Take a proof trial balance. 


ADVANCED COURSE 


241 


Dow, Jones & Company 


Profit and Loss Statement, August 1 — 

-August 31, 19— 

Sales 


$8205.60 1 

Less: Returns 


643.48 

Net Sales 


$7562.12 

Deduct: 



Cost of Sales 



Inventory, August 1, 19— 


$27598.69 

Purchases, 8/1-8/31 

$2763.47 


Less: Returns 

156.66 

2606.81 

Freight In 


126.98 

Total Cost 


$30332.48 

Less: 



Inventory, August 31, 19— 


24641.85 5690.63 

Gross Profit on Sales 


$1871.49 

Deduct: 



Selling Expenses: 



Traveling Expenses 

$435. 


Shipping Department Salaries 

150. 


Delivery Expenses 

131.34 


Shipping Supplies used 

49.90 

$766.24 

General Administrative Expenses: 



Office Salaries 

$475. 


Office Supplies Used 

80.50 


General Expenses 

32.62 


Rent 

200. 


Insurance 

15. 


Depreciation of Furniture 



and Fixtures 

35. 


Depreciation of Horses and Wagons 

15. 

853.12 1619.36 

Net Profit from Operations (forward) 


$252.13 


Add: 

Other Income 

Discount on Purchases 
Interest on Notes Receivable 
Rent Income 
Total Income 


$436.13 

21.57 

100. _ 557.70 

$809.83 


Deduct: 

Other Charges 

Interest on Notes Payable 
Discount on Notes 
Discount on Sales 
Bad Debts 
Net Profit 


$27.38 

31.09 

53.96 

165. _ 277.43 

$532.40 


Distributed as follows: 



f Dow 

$213,591 


Interest on Capital 

< Jones 

179.83 > 

451.03 


[Cox 

57.61 J 


Dow, % net profit 



27.12 

Jones, £ net profit 



27.12 

Cox, | net profit 



27.13 


$532.40 












242 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Dow, Jones & Company 
Balance Sheet, August 31, 19— 

Assets 

Current Assets 


Cash 

Notes Receivable 

Interest Accrued on Notes Receivable 
Accounts Receivable 

Less: 

Reserve for Bad Debts 
Merchandise Inventory 

$13596.24 

165. 

$9088.81 

2577.84 

21.57 

13431.24 

24641.85 

$49761.31 

Investments 

United Dry Goods Stock 

Real Estate (tenement 61 Jones Street) 


10837.50 

10325. 

21162.50 

Fixed Assets 

Horses and Wagons 

Furniture and Fixtures 


825. 

3275. 

4100. 

Expense Items Paid in Advance 

Shipping Supplies 

Office Supplies 

Insurance Unexpired 


279.80 

235.25 

135. 

650.05 

Total Assets 



$75673.86 

Liabilities and Capital 

Current Liabilities 

Notes Payable 

Interest Accrued on above 

Accounts Payable 

Total Liabilities 

$15400. 

192.53 

17354.02 

$32946.55 

Capital 

Dow — Balance 8/1 

Add: 

Interest on Capital 

1/3 net profit 

Less: 

Personal account balance 

$21372.87 

213.59 

27.12 

$21613.58 

225. 

$21388.58 


Jones — Balance 8/1 

Add: 

Interest on Capital 

1/3 net profit 

Less: 

Personal account balance 

$15087.04 

179.83 

27.12 

15293.99 

175. 

$15118.99 


Cox — Balance 8/1 $6000. 

Add: 

Interest on Capital 57.61 

1/3 net profit 27.13 

Personal account credit balance 135. 

$6219.74 

$42727.31 


Total Liabilities an d Capital _ $75673.86 























ADVANCED COURSE 


243 


The Trading Account. In closing the books the Trading account is often used to bring 
together all accounts used in determining the gross profit on sales. It is subsidiary to the 
Profit and Loss Account. 

The following is the function of the Trading account. 


Trading 

Debit: 

(а) Inventory at the beginning 

(б) Purchases for the period 

(c) Returned Sales and Allowances 

(d) Freight Inward 

The balance will be the gross profit on sales and is transferred to the Profit and Loss 
account by an entry debiting Trading and crediting Profit and Loss. 


Credit: 

(а) Sales for period 

(б) Returned Purchases and Allowances 
(c) Inventory at end of period 


WHOLESALE DRY GOODS BUSINESS — Continued 

PRELIMINARY WORK 

September 1, 19— 

Henry W. Taylor has this day withdrawn from the firm of Taylor, Wood & Co., and a 
new firm has been formed, consisting of Clark F. Wood, (Student), and Frank H. Taylor, to 
continue the business heretofore conducted under the name of Taylor, Wood & Co. Henry 
W. Taylor has assigned his interest in the old business to Frank H. Taylor as of this date, 
and articles of copartnership have this day been executed by the partners of the new business. 

According to the articles of copartnership the new partnership agreement is the same as 
the old one (see page 226), excepting that Wood is to receive a salary of $200 a month, (Stu¬ 
dent), $225, and Frank H. Taylor, $150. There is to be no change in the style of the firm 
name, and the capital of the new firm is to be the same as that of the old one, as shown by 
its books, closed as of Aug. 31, 19 —. The capital of Henry W. Taylor in the old business 
is to become the investment of Frank H. Taylor in the new business. The books of the old 
firm are to be used as the books of* the new firm, and are to be closed annually, as of September 
30. 

Make a brief statement of the above conditions in your journal under date Sept. 1 , 19—, 
and frame an entry to transfer Henry W. Taylor’s interest to Frank H. Taylor, making proper 
explanation of the entry. Post the entry, and rule off the account of Henry W. Taylor. Set 
up the new capital account under the old one. 

Books Kept. — You will use the same books for September as you did for August, except¬ 
ing the sales book, which will be replaced by the sales journal. 


TRANSACTIONS 

September 1 

No. 82 Check from Isaac Holman & Sons in payment of note due to-day. 


244 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 83 A, B, C. Duplicate charge bills. Jas. H. Wood & Son; Thompson & Bulkele}'; 
Sibley & Co. Enter the bills in the sales journal, beginning with the number 100, and number 
all succeeding bills consecutively. 

Head your sales journal, Sept. 1 , 19 —. Enter only the serial number of the bill, name of the pur¬ 
chaser, and the amount of the bill, extending the amount into the Items column and the daily total into 
the Total column. The separate entries in the sales journal will not be posted, but the footing will be 
posted at the end of the month. 

Post from the charge bills directly to the accounts in the sales ledger, in the daily posting, and check 
the folio of the account on each bill to indicate that it has been charged. Remember to enter the terms 
in the account. Cash sales bills will not be entered in the sales journal. Place the bills in your Voucher 
File. 

No. 84 Send H. R. Judson, your traveling salesman, check for $75 for traveling expenses. 

September 2 

No. 85 Cash from E. B. Kerns for rent of flat, #74 Center St., August and September, 
$ 200 . 

No. 86 Check from Levy & Garson for invoice of Aug. 25, less 6%. 

No. 87 Invoice from Burke, Fitz Simons, Hone & Co. Enter the invoice in the purchases 
journal. Number this invoice 8. 

Head your purchases journal the same as you did your sales journal, number the entries consecu¬ 
tively, and enter only the name of the creditor and the amount of the invoice. Write the entry number 
on the upper right-hand corner of the invoice. The separate entries in the purchases journal will not be 
posted, but the footing of the book will be posted at the end of the month. Post from the invoices di¬ 
rectly to the accounts in the purchases ledger, in the daily posting, and place the folio of the account on 
each invoice to indicate that it has been credited. Remember to enter the terms in the account. 

No. 88 Pay invoice Burke, Fitz Simons, Hone & Co., due to-day, as follows: Deduct 
from the amount of the invoice the charge for goods returned on Aug. 11, as per ledger, and 
from the balance deduct 1%, as per terms of bill. Write a check for the net amount. 

No. 89 An order was received to-day from Ingham & Case, but as they owe a balance 
which has been running a long time, it was not deemed advisable to sell them more goods on 
account. In response to our telegram they instructed us to ship the goods subject to bank order, 
and allow special cash discount. 

No. 89 a Make a sight draft favor of Commercial Bank for the net amount of the bill, 
pin it to the bill of lading, and leave both at the bank for collection. Treat the transaction 
as a charge sale. 

No. 90 Duplicate charge bill. C. H. Roberts. 

No. 91 Check from Harris & Smith to apply on account. 

September 5 

No. 92 Duplicate cash bill. Weston & Hill, City (check). Enter in cash book only. 

No. 93 Deposit all checks. 

No. 94 Duplicate charge bill. W. O. Harrison; terms, 6% 10 ds., 5% 30 ds. 

September 6 

No. 95 Invoice from Burke, Fitz Simons, Hone & Co. (See No. 87.) 

No. 96 Pay Little Falls Woolen Co., by check, for invoice of August 12, $163.22, less 

1 %. 

No. 97 This check from Jas. H. Wood & Son is on account. 


ADVANCED COURSE 


245 


September 7 

No. 98 Check from Sibley & Co. is in full for bill of July 25. 

No. 99 A, B, C. Duplicate charge bills. B. Q. Wiley; Carlton, Sons & Co.; L. H. 
Parker. 

No. 100 Duplicate charge bill. Burke, Fitz Simons, Hone & Co. for goods returned. 

No. 101 Check from Brown & Wilson for note due to-day. 

September 8 

No. 102 Invoice from Sibley, Lindsay & Curr^Co. 

No. 103 Send check to Sibley, Lindsay & Curr Co., for note due to-morrow. 

September 9 

No. 104 Mr. Taylor draws $200 from the business, by check, for personal use. 

No. 105 Note from Harris & Smith to apply on account. 

No. 106 Received notice from your bank that the draft of 3d inst. on Ingham & Case 
has been paid. 

Note. — When in doubt as to how to classify a transaction, refer to the entry of a similar transac¬ 
tion in the August work. 


September 10 

No. 107 Bill from L. H. Parker, Lima, for goods returned. Send L. H. Parker a credit 
memorandum. 

No. 108 Mr. Wood draws $250, by check, for personal use. 

September 12 

No. 109 A, B. Duplicate cash sales bills. T. D. Winch, and Allen & Co. 

No. 110 Deposit $300 currency and all checks. 

No. Ill Send Sibley, Lindsay & Curr Co. a check for $4484.23, in payment of invoice 
of July 14. 

No. 112 Ingham & Case have paid no attention to letters from Mr. Taylor regarding 
the settlement of their account. Make a sight draft on them for $66.35 and leave it at the 
bank for collection. Write in pencil, in their account in the ledger, Sight draft, 9/12. 

September 13 

No. 113 Check from W. O. Harrison for bill of Sept. 5, less 6%. 

No. 114 Pay cash for stamps and office supplies, $10. 

No. 115 Check from Lewis W. Chase to apply on account. 

September 14 

No. 116 Draw for your own personal use, $150, by check. 

No. 117 Invoice Gimbel Bros. 

No. 118 A, B, C. Duplicate charge bills. J. G. Smith; Lewis W. Chase; Levy & 
Garson. 

No. 119 Discount the invoice of Granite Mills, dated Aug. 15, and send check for the 
net amount. 

No. 120 Duplicate charge bill. Gimbel Bros. 


246 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 121 A, B. Duplicate cash sales bills. E. H. Marcy & Co.; Wallace Bros, (check). 
No. 122 Pay shipping clerk hire, $35, and office help, $40, in cash. 

No. 123 Pay freight bills to date, per agent’s request, by check, $27.45. 

September 17 

Check W. O. Harrison is for note due to-day. 

Deposit all checks. 

The bank informed you, at time of making above deposit, that your draft of 
on Ingham & Case has been returned unpaid. No reason assigned, 
lead-pencil, in their account in your ledger, Draft returned , 9/17. 


No. 124 
No. 125 
No. 126 

the 12th inst. 
Write in 


September 19 

No. 127 Invoice from Little Falls Woolen Co. 

No. 128 Pay rent for September, $300, by check. 

September 20 

No. 129 You have outstanding an interest-bearing note, due to-day, and, as you have 
not enough funds to meet it, the bank has agreed to renew one-half of the face of the note for 
10 days. 

Make your note at 10 days (with interest), in favor of the Commercial Bank, $5000. Re¬ 
ceive credit for the face of the note. Enter in the notes payable book, and add to your deposit 
on stub of the check book. (Date the note to-day, and have your teacher indorse it.) 

You have in effect discounted a note at the bank and received credit for the proceeds. Therefore 
you have increased your bank balance that amount. 

No. 130 Draw a check, in favor of the Commercial Bank, in full for the old note as above 
and four months’ interest. This is your first “ renewal,” and you should study the transaction 
carefully. 

No. 131 Check from W. B. Snow to apply on account. 

September 21 

No. 132 Note received from Lewis W. Chase on account. 

No. 133 Discount the note received from Lewis W. Chase to-day, and receive credit for 
the proceeds. 

No. 134 A, B, C, D. Duplicate charge bills. Jas. H. Wood & Son; Thompson & 
Bulkeley; Sibley & Co.; Brown & Wilson. 


September 22 


No. 135 
No. 136 


No. 137 
No. 138 
No. 139 
No. 140 


Check received from J. G. Smith is on account. 
Deposit the checks on hand. 

September 23 

Mr. Taylor draws cash, $50, for private use. 
Check from B. C. Wiley to apply on account. 
Invoice from Sibley, Lindsay & Curr Co. 

Invoice from Burke, Fitz Simons, Hone & Co. 


ADVANCED COURSE 


247 


September 24 

No. 141 Pay grain and feed bills in cash, $16.75. 

No. 142 Check from J. G. Smith for bill of 14th inst., less 6% discount. 

No. 143 Pay Burke, Fitz Simons, Hone & Co., by check, for invoice of Aug. 31, less 5%. 

September 26 

No. 144 Duplicate charge bill. W. B. Snow; terms, 2% 10 ds., 1% 30 ds. 

No. 145 Send Gimbel Bros, check for note due yesterday. 

When notes or other obligations mature on Sunday, it is customary to pay them the following day, 
but in the states where days of grace are yet allowed they are payable on the preceding day. 

No. 146 Check from Levy & Garson in payment of invoice of 14th inst., less 2%. 

No. 147 Duplicate charge bill. Carlton, Sons & Co. 

No. 148 Check from Darius D. Miner for $5000. This money has been raised to meet 
the “ renewal ” note due in a few days at the bank, and was borrowed on the firm’s demand 
note, with interest, 6%, secured by first mortgage on the flat at 74 Center St. Make the note, 
and the proper entries for the transaction. 

Apparently the firm has issued liabilities of double the value of the asset received, but since the pay¬ 
ment of the mortgage is conditional on the non-payment of the note, the liabilities have actually been 
increased by only the amount of the increase in the assets. 

Since the money was obtained on the note and not on the mortgage, Mortgage Payable account is 
not, of course, charged at this time. 

No. 149 Deposit cash, $200, and all checks. 

September 28 

No. 150 Pay freight bills to date by check, $20.14. 

No. 151 Pay cash for shipping clerk hire, $30; teamster, $45; office help, $40. 

No. 152 Pay telephone bill by check, $15. (Office Expenses a/c.) 

September 30 

No. 153 Draw cash for your own personal use, $40. 

No. 154 Pay, by check, note and interest due at bank to-day. 

No. 155 Pay H. R. Judson his salary for September by check, $150. 

No. 156 Pay rent of stable for September, $50, by check, favor of B. F. Nolan. 

Make proper entry for salaries due the partners. 

Construct a controlling account in each of your subsidiary ledgers, thereby making them 
self-balancing. (See Self-balancing Ledgers, page 224.) 

Complete the daily posting and prove the cash. Foot, post and rule off all books of 
original entry, as in the work for August. Take a trial balance of the general ledger and of 
each of the subsidiary ledgers, and see if the subsidiary ledgers are in agreement with the con¬ 
trolling accounts in the general ledger. 

Use loose journal paper for your subsidiary trial balances, and remember to include only 
the current balances. 

No. 156 a Assuming that the checks issued Sept. 28 and 30, excepting No. 154, are out¬ 
standing, make a bank voucher slip, balance your pass book, and reconcile your bank bal¬ 
ance. 


248 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Dissolution of Partnership. — It has been apparent to your partners and yourself that the 
present conditions in the trade, and the outlook for increasing the business, do not justify a 
continuance of three active partners. Therefore it has been decided that Mr. Wood will 
withdraw from active management, leaving his capital in the business, and that you will retire 
from the firm on Oct. 1, to engage in the shoe manufacturing business. 

Inventories 

Merchandise $22372.76 

Shipping Supplies 93.25 

Office Supplies 106.50 

Adjustments 

(A) Set aside 1% of cost of Furniture and Fixtures as a reserve for depreciation. 

(B) Set aside 1% of cost of Horses and Wagons as a reserve for depreciation. 

(C) Set aside of 1% of the amount of gross sales for September as a reserve for bad debts. 

CD) Insurance expired amounts to $7.50. 

( E ) Interest on Partners’ Investments and withdrawals for September. 

( F ) Interest accrued on Notes Payable. 

You will now proceed to prepare financial statements as of September 30, 19— and close 
the books. Following is the work required in the order in which it should be done. 

1 Make and post adjusting entries 

2 Take an adjusted Trial Balance 

3 Prepare Profit and Loss Statement 

4 Balance Sheet 

5 Closing entries 

6 Frame journal entries closing the accrual account, Interest accrued on Notes Payable, 
and to close Sundry Inventories account, transferring the amounts to Interest on Notes Payable, 
Shipping Supplies, and Office Supplies. 

7 Balance and rule ledger accounts and take a proof trial balance. Close the partners’ 
drawing accounts into the capital accounts and balance the capital accounts. 

EXERCISES 

1 What is the purpose of the Trading account? What items does it contain? To what 
conclusion does it lead? 

2 Compare the method of closing the accounts of trading operations through the Trad¬ 
ing account, as illustrated in the Dry Goods exercise, with the method used in former exercises. 
Which method is preferable ? Why ? 

3 Rule one side of a half sheet of cap paper to represent a page of a general ledger, and 
then construct a Trading account. From their respective accounts in your ledger, transfer 
by direct entries such items as will cause the account to show the merchandising results for 
August. Balance and rule off the account, transfer the gain, and bring down the current in¬ 
ventory. Next cause the account to show the merchandising results for September. Bal¬ 
ance and rule off the account the same as for August. 

4 The check book of the Bigelow Dry Goods Company on October 31 showed an over¬ 
draft of $53.92, and the bank pass book when written up as of that date showed a credit bal¬ 
ance of $416.27. The deposits and collections for November amounted to $13751.84, and the 
checks issued amounted to $8527.39. When the pass book was written up for November, 


ADVANCED COURSE 249 

it showed a credit balance of $6532.28. The checks outstanding were : #389, $156.82; #412, 
$1117.81; #415, $87.12. 

Rule a form of check book stub, and show how you would reconcile the bank balances on 
October 31 and November 30, using the above figures. 

5 Your bank has notified you that the check of J. T. Carpenter, in your deposit of Febru¬ 
ary 28, contains a discrepancy of $10 between the amounts as expressed in words and in figures. 
You find upon investigation that Carpenter was credited from his letter, which accompanied 
the remittance, for $132.75, the amount as expressed in words, and that the check was included 
in the deposit for the amount $122.75, as expressed in figures. Frame proper entries to adjust 
the discrepancy, which will affect the Cash Differences account, and the bank account. 

6 Assume that you have been keeping a General Expense account for all expenses, except 
selling expenses, and that you have a General Expense column in your cash book. You are 
instructed to submit an analysis of the General Expense account, to be used in making up 
a semiannual Trading and Profit and Loss Statement, and are informed that the subdivision of 
the General Expense account is to be as follows : Office Supplies, Office Expenses, Office Salaries, 
Shipping Supplies, Shipping Expenses, Delivery Expenses, Rent, Miscellaneous Expenses. 

Prepare an analysis sheet by ruling as many money columns on a sheet of cap paper as 
you have subdivisions of the account to be analyzed, and head each column with the name of 
a subdivision. 

Assume that your cash book shows the following general expense entries for the period: 
Boxes, $14.25, $17.10, $13.05, $24.60. Automobile repairs, $3.75, $7.50, $18. Store rent, 
$200, $200, $200, $200, $200, $200. Gasoline, $3.60, $4.50, $1.80, $9. Stationery, $12.50, 
$26.30, $3.85, $14.60. Office salaries, $750, $750, $675, $725, $875, $775. Shipping De¬ 
partment salaries, $325, $325, $450, $425.75, $375, $410. Typewriters, $100, $162.50. Nails 
and bands, $3.25, $6.15, $8.50. Garage rent, $25, $25, $30, $30, $25, $25. Postage, $5, $3.75, 
$5, $10. Telephone, $10, $10.75, $11.25, $10, $13.25, $10.85. Typewriter repairs, $1.75, 
$2, $1.25. Typewriter ribbons, $4.80, $2.50. Wages, chauffeur and helper, $100, $95, $100, 
$105, $100, $90. Taxes, $113.75. Insurance, $68.75. Pens, pencils, etc., $1.10, $.75, $2.25. 
Telegrams, $.40, $.25, $.72, $.45, $.30, $.25, $.60, $.93. Electric light, $4.25, $4, $3.75, $3.60, 
$3.25, $2.75. Roll-top desk and chair, $85. Rubber tires, $70, $36. Extra trucking, $3.75, 
$4.25, $2.50, $7.25. Wrapping paper and twine, $14.25, $1.85, $3.60. 

Carry the above items to the proper columns on the analysis sheet, total the columns, 
and make the required analysis on a separate sheet. 

7 Goodwin & Mackey had merchandise on hand July 1, 19—, inventoried at $12209.26. 
They dissolved partnership August 31 of the same year. Their net purchases, including freight, 
during July and August were $6928.34, and their net sales, $13775.50. Their stock on hand 
August 31 was inventoried at $6353.50. Prepare a Trading section of a Trading and Profit 
and Loss Statement, and show the gross profit on trading, and the percentage of gross profit 
on the turnover. 

8 The merchandise inventory schedules of James Sheffield & ^Company on June 30, 19—, 
were as follows: Furnishing Goods, $1458.50; Gloves and Mittens, $1804.50; Knit Goods, 
$1990.75. Their net purchases during the period were: Furnishing Goods, $1391.25; Gloves 
and Mittens, $1600.50; Knit Goods, $3987.25. Their net sales were: Furnishing Goods, 
$3303.60; Gloves and Mittens, $3919.60; Knit Goods, $6555.25. Their stock on hand at 
the beginning of the period was as follows : Furnishing Goods, $2500.90; Gloves and Mittens, 
$2600.50. Knit Goods, $3500.50. Construct separate accounts for each department, and 
show the gross profit on trading, and percentage of profit on each class of goods. 


250 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


9 Using the data in No. 8, prepare a Trading section of a Trading and Profit and Loss 
Statement, and show the gross trading profit and the percentage of the profit of each depart¬ 
ment, the total gross trading profit, and the percentage of total gross profit on the total turn¬ 
over. 

10 From the data given on the Profit and Loss section of your Trading and Profit and 
Loss Statement for September, prepare a Profit and Loss section which will show the selling 
expenses, and the percentage of cost for selling, based on the turnover; the actual general 
and administrative expenses, and the percentage of cost for conducting and administering 
the business based on the turnover. 

In doing this work distinguish between allowances and expenditures. Complete the Profit 
and Loss section. 

11 The assets and liabilities of D. F. Beattey & Co. for the period ended December 31, 
19—, were as follows : Assets — Cash on hand, $43.29; In bank, $6790.24; Notes Receivable, 
$9909.76; Accounts Receivable, $8552.76; Real Estate, $6000; Merchandise, $6713.30; 
Furniture and Fixtures, $1789.48. Liabilities — Accounts Payable, $1736.16; Notes Pay¬ 
able, $2000. The partners 7 accounts were as follows : D. F. Beattey, Capital, $20000; Personal 
(Debit balance), $480. E. H. Sprague, Capital, $15000; Personal (Debit balance), $433.67. 
The open nominal accounts were: Debits — Discounts on sales, $302.57; Interest, $21.34; 
Agents 7 Salaries and Expenses, $764.12; Office Salaries and Expenses, $564.80. The net 
purchases were $8514.27, and the net sales, $13009.57. The merchandise on hand at the begin¬ 
ning of the period was inventoried at $7362.91; real estate at $6180; and furniture and fixtures 
at $1826. 

From the above data make a Trial Balance, a Trading and Profit and Loss Statement, and 
a Balance Sheet. 

The following exercises are given for use in schools which have adding machines: 

12 Prove the charge postings to your sales ledger for August, by listing, first, the charge 
sales from your sales book, and second, the charge entries in the ledger, and comparing the 
totals of the two lists. 

13 Prove the credit postings to your sales ledger by listing, first, the credit payments by 
customers from the cash book and journal, and the return sales; and second, the credit entries 
in the ledger, and comparing the totals of the two lists. Compare the difference between the 
above charge entries list and the credit entries list, with the balance of Accounts Receivable 
accounts as shown in your balance sheet for August. 

14 Prove the credit postings to your purchases ledger for September by listing, first, the 
purchases in purchases journal; and second, the credit entries in the accounts, and comparing 
the totals of the two lists. 

15 Prove the debit postings to your purchases ledger by listing, first, the payments to 
creditors from your cash book and journal, and the return purchases; and second, the debit 
entries in the accounts, an& comparing the totals of the two lists. Compare the difference 
between the above credit entries list and the debit entries list, with the balance of the Accounts 
Payable account, as shown by your balance sheet for September. 

16 Prove your bank balance for September as shown by your check book by listing, first, 
your deposits and collections from your check book stub, and second, the checks, from the 
vouchers, and comparing the difference between the totals of the two lists with the balance 
shown in the check book. 


ADVANCED COURSE 


251 


QUESTIONS 

1 What is wholesaling? 

2 From what do wholesalers chiefly obtain their revenue ? 

3 What is the principal revenue account of a mercantile business ? 

4 What is meant by “trading”? By “turnover”? 

5 Describe the form of journal used in the Wholesale Dry Goods business, and explain the posting. 

6 Describe the cash book, and explain the posting. 

7 How may the cash be proved at any time, when this form of cash book is used? 

8 What is a purchases journal? 

9 Describe the sales journal. 

10 Explain how the posting is done from these two books. Explain the bill and eharge system. 

11 Describe the auxiliary ledgers used in this work. 

12 How may accounts with customers be divided when sectional sales ledgers are used? 

13 What is a private ledger? 

14 What controlling accounts did you construct in this work? 

15 Upon what do the accounts to be kept in any business usually depend? What determines 
the special accounts to be kept? 

1G What is the principal deduction from revenue in a mercantile business? How may the account 
which it represents be divided? 

17 Explain “analyzing an account.” 

18 How are accounts usually divided? Explain each division. 

19 Define assets and liabilities. Explain fixed assets; floating assets; fixed liabilities; floating 
liabilities. 

20 When a legal change takes place in the ownership of individual or partnership business, what is 
the effect, and what must be done? 

21 Is it necessary to open a new set of books when such a change takes place? 

22 How would a new set of books be opened? 

23 What are supporting records ? 

24 What is a shipper’s order? Explain the difference between this and a C.O.D. express shipment. 

25 What are return books ? Explain how returns are treated in this work. 

26 What are the different classes of expenses? Explain each. 

27 When are merchandise inventories usually taken ? For what purposes ? At what price ? 

28 How can the true profits of any business period be determined ? 

29 What is a “trading and profit and loss statement”? Explain each section in detail. 

30 What is the difference between the terms “gross profit on trading” and “net profit on trading”? 

31 What are reserves? Explain “depreciation.” 

32 W'hat is a balance sheet ? 

33 How are the assets and liabilities usually arranged on a balance sheet in a mercantile business ? 

34 What is the principal difference between a profit and loss statement and a balance sheet ? 

35 What are “quick assets”? Give some examples. 

36 How is the general ledger closed in this work, and in accordance with what accounting axiom ? 

37 Why are not the partners’ capital accounts closed by passing the entries through the journal* 
Instead of by making direct entries? 

38 What is a post-closing‘trial balance? 

39 What new features of bookkeeping and accounting have you learned in this work? 


CORPORATIONS 


A Corporation is an artificial body created by law for certain purposes, which are stated 
in its charter, or articles of incorporation. It is composed of individuals, and differs from a 
partnership chiefly in that it is limited in its activities to the specific purposes for which it 
was created; that it has a capacity of perpetual succession; and that the members which 
compose it are not liable for the debts of the corporation, excepting in certain cases, and then 
only for a limited sum. 

Corporations are divided into two general classes; namely : public corporations, which are 
created for the purposes of government and the management of public affairs; and private 
corporations, which are created for private purposes, and the management of private affairs 
in which the members are interested. Some private corporations are engaged in enterprises 
which are of a public nature, but which are conducted and managed for private purposes or 
private gain. Some of these corporations, such as railroad, gas, water, telegraph, telephone, | 
and street car or traction companies, etc., are called “ public service corporations.” Banks, 
trust companies, and insurance companies are called “ financial corporations,” and those engaged 
in manufacturing or trading are called “ business corporations.” Only business corporations 
will be treated in this work. 

Business Corporations. — Until comparatively recent times, most of the manufacturing 
and trading done in this country was conducted under two forms of management; namely, 
the single proprietorship form, and the partnership form. Each of these forms possesses 
certain advantages and disadvantages as compared with the corporate form. Among the ad¬ 
vantages are: the ease with which they may be established, the freedom of action allowed, and 
the benefit to the business from the active, personal efforts of the proprietor or partners. The 
disadvantages are: the usual inability of a single proprietor or of several partners to command 
the necessary capital to conduct a large enterprise; liability of the individual owner, or of 
each member of a firm, for all the debts of the concern; and the dissolution of the partner¬ 
ship, and the possible discontinuance of the business, upon the withdrawal or death of a partner. 

For the development of great natural resources, and for the distribution of both natural and manu¬ 
factured products to meet great demand, large capital and organized effort are required, and these are 
usually best obtained by the corporate form of business. During recent years the corporate form has 
made great strides in this country, until now it dominates most of the important lines of business, such as 
mining, manufacturing, merchandising, or trading, as well as transportation and other public service 
activities. 

Holding Companies. — A corporation which is formed for the purpose of controlling 
other corporations is called a “ holding company ”; corporations so controlled are called 
“ subsidiary companies.” The larger part of the stock of each subsidiary company, or in 
some cases all of it, is transferred to and owned by the holding company, which issues its own 
stock in exchange. The subsidiary companies retain their corporate identities, and declare 
dividends like other corporations. The holding company may thus have a large income, 
which is distributed in dividends to its stockholders. 

252 


ADVANCED COURSE 


25 6 


Subsidiary companies are operating concerns; the holding company is usually an executive concern. 
Some of the larger corporations partake of the nature of holding companies, as they both control other cor¬ 
porations and operate separate plants or systems. Holding companies are monopolistic in nature, and 
their creation and conduct are closely regulated by law. 

Trusts. — A combination of business corporations formed for the purpose of controlling 
the output, and maintaining a monopoly of any product or products, and fixing the prices 
of the same, is called a “ trust.” Some business corporations, owing to their practically un¬ 
limited capital, enormous output, wide activities, and their control of a large part of the kinds 
of products which they handle, are commonly called trusts. 

Corporations: How Created. — Formerly corporations were created by special acts of 
the legislatures, but the statutes of all of the states now provide other methods for the formation 
of corporations. 

Government Supervision. — Corporations, being creatures of government, are subject to 
the supervision of the power which created them. The supervision is expressed in their charters, 
and in various acts of the legislatures, and is exercised by special governmental bodies, such as 
Railroad Commissions, Public Service Commissions, etc. Corporations which do an inter¬ 
state transportation business are subject to the supervision of the national government, and 
this supervision is exercised by the Interstate Commerce Commission. 

The extent of the supervision of corporations differs in the various states. In some states, it is com¬ 
paratively slight; while in others it amounts to the control of such important matters as issuance of stocks 
and bonds, method of accounting, forms of reports or statements, rates for services, and in some instances, 
maximum or specific prices of products. The Interstate Commerce Commission has power to control the 
rates of railroads which do an interstate business. 

Corporations : How Formed. — Corporations are formed in accordance with the require¬ 
ments of the statutes concerning corporations, and these differ more or less in the various 
states. A corporation may be formed in the state in which it is domiciled, that is, in which 
it has its main office, or it may be formed, unless the statutes restrict, under the laws of any 
other state. A corporation formed in the state in which it is domiciled is called in that state, 
a “domestic corporation,” and in all other states, a “ foreign corporation.” 

The statutes of the various states specify how many persons are required to organize 
a corporation. In most states, at least three persons of full age must unite to form a cor¬ 
poration ; in some states, five or more are required; and in at least one state, any number 
may so unite. These persons meet and make a certificate of incorporation which usually 
contains: the name of the proposed corporation; purpose or purposes for which it is formed 
and location of its principal business office; amount of capital stock, kinds of stock, and number 
and par value of its shares; duration of incorporation; number of directors; and such other 
information as the statutes may require. 

Public corporations, and some private corporations, as hospitals, colleges, etc., do not issue stock, 
and are called “non-stock corporations.” 

After the certificate of incorporation has been signed by the incorporators, and acknowl¬ 
edged before a notary public or some similar officer, it is then submitted to a proper state 
officer, usually the Secretary of State, who, if he accepts it, indorses it to that effect and re¬ 
turns it to the incorporators. 

When the incorporation fees and the annual tax have been paid, the certificate, accom¬ 
panied by the State Treasurer’s receipt, is then filed in the office of the County Clerk (or other 
recording officer) of the county in which the principal business office of the company is to be 
located. Some states require that the certificate of incorporation shall be filed in all the counties 


254 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


of the state in which the corporation intends to do business. Foreign corporations are 
required to file a certificate of designation with the Secretary of State. 

After the certificate of incorporation has been filed, subscription books are opened and 
the capital stock is disposed of by subscription or otherwise. If the corporation is to be formed 
to take over a going business, the subscription list is usually dispensed with, the former sub¬ 
scriptions of the incorporators taking its place. 

A certain amount must be subscribed for and paid before the corporation is permitted t® 
begin business. After such stock has been subscribed for, and such payment has been made 
as required by the statutes or stated in the certificate, a meeting of the stockholders is called, 
at which the officers are elected and by-laws are adopted. The record of these proceedings 
is filed with the Secretary of State, and a certificate is issued by him to the effect that the cor¬ 
poration is fully organized and authorized to do business under the laws of the state. In a few 
states, the statutes require that the meeting of the incorporators and the arranging of the 
organization must take place before the application for the charter is filed. 

Kinds of Stock. — The capital stock of a corporation is divided into shares, each share 
representing a proportionate part of the authorized capital. In this country the shares of a 
business corporation are usually of two kinds, called “ preferred stock ” and “ common stock.” 
Preferred stock is stock to which some preference has been given, such as regards the payment 
of dividends, or the assets in case of liquidation, over other stock issued by that corporation. 
There may be more than one kind of preferred stock, such as first preferred, second preferred, 
etc. The dividends payable on preferred stock are usually limited in amount; they may be 
either cumulative or non-cumulative. If cumulative, the stated dividends attach to the stock 
each year whether or not they are earned, and all arrearages of such preferred dividends must 
be paid before the common stock receives any dividend. Non-cumulative dividends do not 
attach to the stock during any period when they are not earned. 

Common stock is the ordinary stock of a corporation, with neither special privileges nor 
restrictions. When all the stock is on the same equality as to voting, dividends, and par¬ 
ticipation in assets, it is common stock. 

When there is more than one issue of stock, it is customary to keep separate accounts for each issue, 
as Preferred Stock, First Preferred Stock, Second Preferred Stock, Common Stock, etc. 

The amount of stock authorized as specified in the charter is called the “ capital stock of 
the corporation.” The amount of stock subscribed, paid for, or issued is the “ paid-up capi¬ 
tal,” also called the “ outstanding stock.” Stock which has been issued and has afterwards 
been purchased by, or donated to, the corporation is called “ treasury stock.” Stock which 
has not been subscribed for and not issued is sometimes called treasury stock, but since such 
stock has no existence, it can have no value, and therefore should not be treated as an asset. 
Such stock is called “ unissued stock.” 

Stock Certificates. — The shares of stock in a corporation are issued in the form of cer¬ 
tificates, each of which states the kind of stock, par value, and the number of shares which 
the certificate represents. Stock certificates are transferable by assignment, either wholly 
or in part, at will, but such transfer is not complete until the proper record has been made on 
the books of the corporation. 

Bonds. — A bond is an obligation, and is in effect a promise to pay a certain sum and 
interest on the same; the amount of the sum, the date of payment, the rate of the interest and 
when payable, being specified in the bond. It is one of the functions of corporations to issue 


ADVANCED COURSE 


255 


bonds, and the bonds of business corporations are usually issued against tangible assets. To 
secure payment of these bonds, the corporation is required by statute to execute a mortgage, 
or some other form of lien on its property, to some trustee or trustees, to be held as security 
for the payment of the bond at maturity, and of the interest as it falls due. 

Bonds are issued for the purpose of raising funds for the use of the corporate business, 
and in accordance with the provisions of the statutes, and with the consent of the stockholders. 

Forms of Bonds. — There are two general forms of bonds; namely, coupon bonds and 
registered bonds. Coupon bonds are usually payable to bearer, and have interest coupons 
attached which are also payable to bearer, and which are promises to pay the amount of in¬ 
terest due at each interest period, as specified in the bond. Registered bonds are bonds which 
are issued in the names of particular persons, and are transferable only on the books of the 
corporation. Interest on registered bonds is paid only to persons in whose names the bonds 
appear on the books of the corporation, or to their assignees. Some coupon bonds are regis¬ 
tered as to the principal of the bond, the coupons being payable to bearer. 

Kinds of Bonds. — Bonds are of various kinds, and are usually designated by the nature 
of the lien by which they are secured, or by the more important or distinctive feature of the 
issue, such as mortgage bonds, equipment bonds, sinking fund bonds, income bonds, con¬ 
vertible bonds, debenture bonds, etc. 

From a bookkeeping standpoint, bonds are treated the same as are notes payable or mortgages pay¬ 
able, a general Bond account or separate accounts for each kind being constructed. 

Sinking Fund. — A fund created out of net earnings and set aside for the purpose of pay¬ 
ing off a fixed obligation at maturity is called a “ sinking fund.” The money so set aside is 
taken out of the business and either deposited with a trustee or invested in marketable interest- 
bearing securities. Such money is called “ invested capital ” to designate it from “ working 
capital,” or the capital actively used in the business. A sinking fund is an asset to the business. 

For commercial purposes the usual way of providing a sinking fund sufficient to pay off a bonded 
indebtedness is to set aside each year from earnings either a proportionate part of the amount of the debt 
for the number of years the bonds have to run, or such a sum as will, with accumulated interest, amount 
in the given number of years to the amount of the bonds. 

In both cases, the sum set aside each year would be immediately invested. The rate of interest on 
the investments in the second case would be that necessary to accomplish the purpose of the fund, and the 
interest would be credited to Sinking Fund account. The interest on the investment in the first case 
would be credited to a revenue account, and the interest on the bonds charged to a Revenue Expense account. 

Dividends. — The profits and losses of a corporation are found through the Trading and 
Profit and Loss accounts, the same as in any other business, and the net profits are carried 
to the Surplus account. The division of profits among stockholders is made by means of 
dividends, which are declared at fixed percentages, such as 1§%, 3%, 6%, etc., on the out¬ 
standing stock. Dividends are payable only to stockholders of record at the time the stock 
books are closed, or at specified dates, excepting in cases of a few stocks which have coupons 
attached to the certificates, when the dividends are paid on presentation of the coupons. 

Separate accounts are usually kept for different classes of dividends, when there is more than one kind 
of stock, as Preferred Dividend account, Common Dividend account, etc. 

Surplus. — The term “surplus” usually applies to a portion of the profits withheld from 
distribution, either for the purpose of establishing a permanent addition to the capital of the 


256 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


corporation, or for such other purposes as the board of directors may designate. In practice, 
as above stated, the net profits are carried to Surplus account, and after the dividends have 
been charged to it, the balance is the actual surplus for the period. The surplus frequently 
serves to enable business corporations to maintain their dividends at regular rates during periods 
of depression. 

Directors. — The affairs of a corporation are managed by a board of directors. In a few 
states, the directors for the first year are named in the certificate of incorporation. In other 
states they are elected by the stockholders at their first meeting. The number of directors 
of a corporation is either specified in the charter application or is fixed by the by-laws. The 
minimum number allowed by law is usually three. 

In the larger corporations, where the board of directors is generally composed of a con¬ 
siderable number of members, the powers of the board are given, during the interim between 
board meetings, to an executive committee, which must be composed of members of the board, 
and that committee becomes the real managing body of the corporation. In addition to an 
executive committee, a finance committee is often appointed to supervise the financial affairs 
of the company. 

Officers. — The officers of a corporation are usually president, secretary, and treasurer, 
who are elected by the board of directors. There may be one or more vice-presidents, and 
other similar officers, and sometimes two offices may be held by one person. 

The President. — In most corporations the president is the chief executive officer. In 
the very large corporations, some of the duties usually performed by the president are as¬ 
sumed by the chairman of the board of directors. Generally the president presides over the 
meetings of the board of directors, and, if authorized to do so by the by-laws, also over the 
meetings of the stockholders. He can bind the corporation in most routine matters, and 
usually affixes the corporate signature to instruments requiring such signature. Other matters 
of unusual importance or outside of the regular routine must be specially authorized by the 
board to bind the corporation. 

The president is usually required to exercise a general supervision over all the corporate 
business, and when necessary or required, make reports to the board of directors and to the 
stockholders of the condition of the affairs of the corporation. He is generally required, 
with the secretary or treasurer of industrial corporations, and with the secretary or treasurer 
of financial corporations, to sign the certificates of stock. The president must be a member 
of the board of directors, and as a director, he must be a stockholder in the corporation. 

The Secretary. — The duties of the secretary of a corporation are, among other things, 
to keep a record of the proceedings of the stockholders and directors, and such other records 
as do not pertain to the work of the treasurer. The secretary is usually custodian of the cor¬ 
porate seal. He need not be either a member of the board of directors or a stockholder in the 
corporation, although he is sometimes both of these. He is usually required to take an 
oath of office, binding himself to the faithful performance of his duties. 

The Treasurer is the financial officer of the corporation. His duties vary in different con¬ 
cerns. In the smaller corporations, besides having custody of the funds and securities of 
the company, he has direct supervision of the accounts, and keeps the general or business 
oooks. In the larger corporations, the accounting is under the direction of a controller or 
an auditor, and the purely financial operations are in charge of the treasurer and his assist¬ 
ants. The treasurer is responsible to the board of directors, or to the finance committee when 


ADVANCED COURSE 


257 


Stock Certificate Book 









Aboriginal 

Certificate. 


No.Origir>al 

Shares. 


Ab.ofShares 

Transferred. 










9 - 





STATE OP PENNSYLVANIA. 


|£$ TjjAy_ 


Gbe Central national »anh of Pittsburgh, 


•'% •'tyl/z \j . \| JafiLukaMat nwnazMefcaaMaldec 




such a committee exists. He need not be either a stockholder or a member of the board of 
directors, although he may be either or both of these. He is usually required to give a bond; 
and in some states must give a bond in such amounts as the by-laws shall fix and determine. 

Books of a Corporation. — There is no system of bookkeeping peculiar to a corporation. 
The business transactions of a corporation do not differ in form from those of a partnership 
or of an individual proprietor. The volume of business is usually greater than that done by 
an individual, but this affects only the number, and not the kind nor necessarily the form 
of the books used. Each corporation, excepting where the form of its accounts is regulated 
by law, keeps its books, like all other concerns, in accordance with its own methods and the 
general principles of accounts. A few of the accounts of a corporation will differ from those 
of a private concern, and the form of its statements may also be different, but otherwise the 
general records are practically the same in both cases. 

Corporate Books. — The only books which are peculiar to a corporation are those which 
show the operations connected with the corporate form of the concern, and contain a record 
of the corporate proceedings, and of the issuance and transfer of its stock. 

The special books of a corporation are the minute book, subscription book, stock certifi¬ 
cate book, stock ledger, stock transfer book, and dividend book. 

Minute Book. — This book contains a record of the proceedings of the stockholders and of 
the board of directors. Sometimes separate minute books are kept for the proceedings of 
the stockholders and the board of directors. All entries in the minute book should be made 
by the secretary, and the book retained in his custody. The usual form of a minute book is 
that of an ordinary “ record ” book, the pages of which are ruled like a sheet of legal cap paper. 












































258 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Subscription Book. — This book contains a list of the subscribers to the stock, with tha 
number and par value of the shares subscribed for by each. If stock is paid for in install¬ 
ments, a separate space for each installment should be provided in the subscription book, 
or a separate installment book may be used. 

Stock Certificate Book. — This is a book of blank certificates and stubs, and these certificates 
are issued to the stockholders as soon as their subscriptions are fully paid. (See form, page 
257.) The stubs are filled out before the certificates are detached, and from them is made 
up the credit side of the stock ledger, in which each stockholder receives credit for the num¬ 
ber of shares held by him. 

On the back of each certificate is a blank bill of sale or form of assignment, by which a 
stockholder may transfer his stock to any other person. 

When a certificate is surrendered, it is stamped “ canceled,” and pasted on to its own 
stub in the stock certificate book. 

Transfer Book. — This is a book of printed forms and blanks to be filled in whenever a stock¬ 
holder sells his stock, or any part of it, to another person. A stock certificate, when signed 
by the seller or his attorney, authorizes the transfer of a certain number of shares of stock 
from the account of the seller to the account of some other person named in the certificate. 
The transfer book serves as a journal to the stock ledger, and from it are made all entries after 
the original stock issue of the business has been entered in the stock ledger. 


Stock Transfer Book 


tssisa 

Cancelled. 

Shares 

Cancelled. 

WET 

TRANSFERRED BY 

p — - ■ --- ■ ===== = =====-—TU 

5or Dalue ReceiueJ),_do hereby assign and transfer to 




Numbers of 
Maw Certificates 
| Issued. 

New Shares 


TO 


h^- 

I 

200 



K^ZCtSS-77'^ Sharp.: of thp Capital Stnrlr «F 




Cbe Central national Bank of Pittsburg, Pa. 

EDitness hand and seal . this 4 ^day nf 9 









Sealed and delivered in the presence of 

/fN. IlS.1 

- C 





[f ., } 


Stock Ledger. — This book is auxiliary to the general ledger, and its credit balance 
should always agree with the Capital Stock balance in the general ledger. The stock ledger 
contains the name of every person holding stock, either by original issue or by transfer. It 
is made up originally from the stubs of the stock certificate book, and as the stock is issued, 
each holder is credited in the stock ledger with the par value of the stock. After the opening 
entries, all entries in the stock ledger should be made from the stub of the transfer book. These 
entries always consist of a debit to a seller of stock whose name is already in the stock ledger, 
and a credit of an equal amount to the buyer, whose name must be entered in the stock ledger. 

Dividend Book. — The dividend book contains the names of all persons who have open 
accounts in the stock ledger, and opposite the name of each person is recorded the amount 
due him when a dividend is declared. This book may contain a space for the signature of 































ADVANCED COURSE 


259 


each stockholder acknowledging the receipt of his dividend, but in the larger corporations 
these dividends are generally paid by voucher checks which are in themselves receipts. 

The following forms illustrate the dividend book and the dividend check. 



Dividend Check 



Transfer Agents. — Among the larger corporations it is customary to appoint transfer 
agents who attend to the issue and the transfer of stock, and who should have charge of the 
stock certificate book, the stock ledger, and the transfer book, which relieves the secretary of 
a great deal of labor and responsibility. 

Special Corporate Accounts. — A few accounts are peculiar to corporations, such as Capi¬ 
tal Stock account, Treasury Stock account, Subscription account, Donation account, Surplus 
account, Dividend account, etc., and these take the place of capital and reserve accounts 
in proprietary or partnership businesses. 




























260 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Good Will. — The business activity of private concerns is dependent upon the voluntary 
patronage of the public, and to the extent that this patronage is secured, it affects the growth 
or stability, or both, of the business of that concern. When a business has secured a patronage 
which is likely to continue, even though the ownership or location of the business, or both, 
should change, it constitutes a valuable asset to that business. This is called “ good will.” 
In the sale and taking over of a going business, the value of its good will is always a matter of 
agreement between the parties concerned, and is carried as an asset on the books of the new 
concern at cost, until some adjustment of it has been made. Some concerns charge off at 
intervals a portion of the cost of good will, until the whole amount has been absorbed through 
the profits, while others carry it as a permanent asset. The former is regarded the better 
practice, especially for corporations. 


PROPOSITIONS 

The following propositions are given for the purpose of illustrating the opening and closing 
of corporation books, and the entries to be made when dividends are declared. 

1. James Brown, William Harper, Charles Edwards, Maurice Chaney, and William Up¬ 
ton have formed the American Motor-Truck Company with a capital stock of $100000, of which 
Brown, Harper, and Edwards have subscribed $30000 each, and Chaney and Upton, $5000 
each. The minute book will show the proceedings of such meetings as have been held, and 
as soon as all the stock is subscribed for, the following journal entry should be framed : 

Subscription $100000 

Capital Stock, $100000 

This entry should be posted to the general ledger. 

Suppose the stock subscriptions are to be paid in two installments, one due January 1, 
and the other February 1. When the first of these installments is paid, the cash book of the 
corporation should contain a debit entry of $50000, and Subscription should be credited for 
this amount. When this entry has been posted to the general ledger, it will cancel half the 
Subscription account. When the second installment is paid, a similar entry should be framed 
in the cash book; and when this entry has been posted, it will balance the Subscription ac¬ 
count. 

The stock will now be issued, and from the stub of the stock certificate book each of the 
subscribers should be credited in the stock ledger with the amount of the stock issued to 
him. 

2. A corporation is formed to acquire the patent rights of an envelope sealing machine 
invented by William Waugh, and to manufacture and sell the same. The authorized capital 
stock is $50000, and the par value of the shares is $10 per share. Waugh is to receive 2500 
shares of the stock in exchange for his rights in the patent. A subscribes for 1000 shares, B. 
1000 shares, and C, 500 shares, which subscriptions are to be paid in cash.. The opening entry 
in the journal of the corporation would be: 

Subscription, $25000 

Patent Rights, $25000 

Capital Stock, $50000 

When the subscriptions are paid, an entry would be made in the cash book, crediting 
Subscription, $25000, which, when posted, would balance the Subscription account. 


ADVANCED COURSE 


261 


Suppose later Waugh should donate 1000 shares of the stock to the company, which, 
it is estimated, can be sold for $6000, to provide additional working capital when needed, 
and this stock is placed in the treasury. There are two ways of treating a transaction of this 
kind. The first is to frame a journal entry: 

Treasury Stock, $6000 

Donation, $6000 

When this stock is sold, Treasury Stock is credited for $6000 in the cash book, and a journal 
entry is framed debiting Donation account and crediting Surplus account for the amount 
received from the sale of the treasury stock. 

A second and better way is to credit the account for which the stock was first issued, 
which in this case is Patent Rights, and the entry would be: 

Treasury Stock, $6000 

Patent Rights, $6000 

This would reduce the cost of the patent rights to the company by the amount of the 
estimated value of the stock donated. 

If the stock were sold for more or less than its estimated value, the actual amount re¬ 
ceived would be credited to Treasury Stock in the cash book, and a journal entry would be 
framed to adjust the difference. If sold for, say, $1000 more than its estimated value, the 
entry would be: 

Treasury Stock, $1000 

Patent Rights, $1000 

If sold for less than its estimated value, the reverse entry would be framed for the amount 
of the difference. 

3. The firm of Warren & Carson have been engaged in the manufacture of furniture, 
and they transfer their business to the Warren & Carson Manufacturing Company, with a 
capital stock of $100000, par value of the shares, $100; the stock to be divided as follows: 
W. A. Warren to receive 500 shares, and E. B. Carson 250 shares. C. M. Harris has sub¬ 
scribed for 50 shares; D. J. Jones, 50 shares; D. E. Leavitt, 50 shares; and 100 shares are 
unissued, to be issued and disposed of for the benefit of the business when so voted by the 
directors. The assets and liabilities of the firm of Warren & Carsoil are as follows: Assets. — 
Cash, $7500; Notes Receivable, $22690.50; Accounts Receivable, $41987.50; Merchandise, 
$49800; Unfinished Goods, $24200; Raw Materials, $38700; Real Estate, $20000; Total 
Assets, $204878. Liabilities. — Notes Payable, $46965.50; Accounts Payable, $72912.50; 
Mortgages Payable, $15000; Total Liabilities, $134878. Warren’s net worth, $46064.75; 
Carson’s net worth, $23935.25. 

If it is desired to open a new set of books, as is generally the case when a new corpora¬ 
tion is formed, it is customary first to close the # old books, which should be done by framing 
a journal entry, debiting the Warren & Carson Furniture Company for the total amount of 
the assets, and crediting each asset account for its respective amount. Posting this entry 
will balance the asset account. Then a journal entry should be framed, debiting the liability 
accounts for their respective amounts, and the separate accounts of the partners for their 
respective amounts, and crediting the Warren & Carson Furniture Company for the total. 
Posting this entry will close all liability accounts, the partners’ accounts, and also balance 
the Warren & Carson Furniture Company account, and close the books of the old business. 

One journal entry could be framed instead of two, crediting the assets and debiting the 


262 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


liabilities and the partners. This would avoid the necessity of constructing an account on the 
old books with the Warren & Carson Furniture Company. 

To open the corporation books, the amount of the subscribed capital stock, $90000, 
must appear on the credit side of the general ledger, the amount of the assets of the old business 
must appear as debit balances, and the liabilities as credit balances. The names of Warren 
and Carson must not appear in the general ledger of the corporation, as their worth at closing 
has been absorbed by the capital stock. A journal entry should be framed for the above as 
follows: 


Cash, 


$ 7500. 


Notes Receivable, 


22690.50 


Accounts Receivable, 


41987.50 


Merchandise, 


49800. 


Unfinished Goods, 


24200. 


Raw Materials, 


38700. 


Real Estate, 


20000. 


Good Will, 


5000. 


Subscription, 

Notes Payable, 

15000. 

$46965.50 


Accounts Payable, 


72912.50 


Mortgages Payable, 


15000. 


Capital Stock, 


90000. 


Referring to the statement of assets and liabilities of Warren & Carson, it will be seen 
that the actual difference between the assets and liabilities of that firm is $70000. For this 
amount, E. A. Warren has received $50000 of the capital stock in the new corporation, and 
E. B. Carson, $25000, a total of $75000, or $5000 more than the actual difference between 
the assets and liabilities of the firm. This difference represents the agreed value of the good 
will of the old business, and thus Good Will should be debited for $5000, since it costs the 
new business that much, and is regarded an asset. The remaining $15000 of the $90000 
capital stock issued is balanced by the debit of Subscription, $15000. When this journal 
entry has been posted to the general ledger of the new books, the books of the corporation 
are correctly opened. Warren should receive stock certificates of the par value of $50000, 
and Carson stock certificates of the par value of $25000. 

When the subscriptions of the new stockholders, Harris, Jones, and Leavitt, are paid, 
an entry in the cash book crediting Subscription for $15000 would be made, and stock issued 
to Harris, Jones, and Leavitt, to the par value of $5000 each, making a total of $90000, which 
is the amount of the stock subscribed and issued, and also the amount of the paid-up capital 
of the company. The stock issued would appear on the credit side of the stock ledger under 
the accounts of the respective stockholders. The cash item in the journal would be checked, 
since the amount appears in the cash book. 

In the proposition just advanced and explained, let us suppose that the corporation does 
not care to go to the expense of purchasing new books, but desires to make such entries as 
will continue the books of the partnership as corporation books. Examining the above journal 
entry, it will be seen that the accounts showing the assets and liabilities of the old business 
are not changed after they have been closed in the books of the parnership and transferred 
to the books of the corporation. Therefore no entries for these accounts are necessary, as they 
will have the same balances in either form of business. 


ADVANCED COURSE 


263 

To change the books from the partnership form to the corporate form, the following journal 
entry is framed: 

W. A. Warren, $46064.75 

E. B. Carson, 23935.25 

Good Will, 5000. 

Subscription, 15000. 

Capital Stock $90000. 

When this entry has been posted to the general ledger, the books of the old business are 
correctly opened as corporation books. 

The stock ledger, of course, will be opened exactly as in the first proposition, since the 
conditions are not changed. The capital stock is made up of the surplus of assets over lia¬ 
bilities (which is shown by the net worth of W. A. Warren and E. B. Carson)of good will, 
$5000; of subscription, $15000. The above journal entry when posted will balance the 
personal accounts of Warren and Carson, and also show the amount of subscription due and 
the value of the good will, while Warren and Carson will receive credit on the stock ledger 
for $75000 worth of capital stock, leaving the remaining $15000 to be credited to the proper 
persons when the subscriptions are paid. 

4. The balance sheet of the Waugh Envelope Sealing Machine Company, capital stock 
$50000, for the year ended December 31, 19—, showed net earnings for the current period 
of $18375.84, which amount was carried to Surplus account. The directors on January 10 
declared a semiannual dividend of 3% on the capital stock, the stock books to close January 
15 and reopen February 1. The entry for the declared dividend would be: 

Surplus, $1500 

Dividend, $1500 

When the dividend is paid, the Dividend account would be debited in the cash book, 
which would balance the Dividend account for the period. 

5. The balance sheet of the Harper Shoe Company for December 31, 19—, shows that 
the liabilities exceed the assets by $13250. At a meeting of the stockholders, it was decided, 
in view of the prospects of the company, to meet the deficiency by a voluntary assessment. 
When the books are closed as of December 31, 19—, an Impairment account should be con¬ 
structed to represent the deficit. The entry which would be framed to close the Profit and 
Loss account would be: 

Impairment, $13250 

Profit and Loss, $13250 

When the assessment is levied, each stockholder should be charged with hi§ proportion¬ 
ate share in the stock ledger, and a journal entry should be framed, debiting Assessment and 
crediting Impairment for the amount of the assessment. When this entry has been posted > 
tne Impairment account will balance, and when the assessment has all been paid, and the 
proper entry framed and posted, Assessment account will balance. 

EXERCISES 

The entries for the following exercises, with proper explanations, are to be framed on 
loose paper. No posting is required. 

1. A, B, and C have organized a corporation for the purpose of building and operating 
an electric light plant, and of selling current to the public. The authorized capital stock is 
$2000000, par value of the shares $100. A subscribed for 500 shares, B, 300 shares, and C. 


264 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


200 shares. Other subscriptions aggregated 7000 shares. The subscriptions were all paid in 
cash, and later 1000 additional shares were subscribed for and paid in cash. 

Frame proper entries for the above transactions, and state the amount of stock remaining 
unissued. 

2. To raise working capital, the stockholders of the Oro Mining Company donated 10000 
shares of the stock of the company to the treasury. The par value of the stock is $5, and 
it was estimated that it would sell for an average of $2.50 per share. The treasurer reported 
that he had sold 1000 shares at $3, 2500 at $2.75, 5000 at $2.50, 1000 at $2.25, and 500 at $2. 

Frame proper entries for the above transactions, using the first method explained in prop¬ 
osition 2, page 260. 

3. A corporation is formed with an authorized capital of $200000, par value of the shares 
$100, to take over a manufacturing business conducted by A and B as a partnership. The 
assets are to be taken at their book values, and the partners are to guarantee the full pay¬ 
ment of all outstanding notes receivable and accounts receivable. Each partner is to receive 
$75000 in stock for his interest in the old business, and $50000 of stock is to be offered for 
subscription at par, to provide additional working capital. 

The balance sheet of the old business shows the following assets and liabilities: Assets. — 
Cash, $10375.25; Accounts Receivable, $34216.81; Notes Receivable, $18642.34; Finished 
Products, $24211.96; Goods in Process, $13687.25; Materials, $15134.52; Machinery 
and Equipment, $35917; Furniture and Fixtures, $1252; Office Supplies, $875.50; Shipping 
Supplies, $217.75; Insurance on Goods, $112.25. Liabilities. — Notes Payable, $15875.25; 
Accounts Payable, $13767.38. A’s capital, $62500; B’s capital, $62500. 

Assuming that a new set of books is to be opened, and that C has subscribed for 200 shares, 
and D 300 shares, frame the journal entry that should be made on the corporation books when 
the old business is taken over. Frame the entry that should be made when the subscriptions 
are paid, and state in what other books records would be made for the transactions. 

4. The balance sheet of the Consolidated Electric Manufacturers Company for Dec. 31, 
19—, showed the following assets and liabilities, exclusive of surplus or deficit; Assets. — 
Cost of properties, including trade marks, patent rights, real estate, building and machinery, 
$16359861.95; Investments in affiliated companies, $575,000; Deferred charges to operar 
tions : insurance, interest and other periodical expenses, $143146.89. Current assets. — Inven¬ 
tories of raw material, manufactured products, and supplies on hand, $4077973.79; Accounts 
Receivable, $1892705.86, less reserve for discounts, $50000. Notes Receivable $128680.01; 
Cash on hand and in banks, $572680.22. Current liabilities. — Notes Payable, $2661563; 
Loans, $372176.64; Accounts Payable, $158544.33. Capital stock authorized and issued — 
Preferred shares, $100 each, $5000000; Common shares, $100 each, $15000000. 

From the above data prepare a balance sheet, including surplus or deficit, and arrange the 
assets and liabilities in the order of fixed and floating, with the quickest or most liquid asset last. 

If the balance sheet shows a surplus, assume that a dividend of lf% was declared on the 
preferred stock for the period by the directors, and frame the entry that should be made for 
such declaration. 

5. Assume that the balance sheet of the above corporation showed a deficit for the period 
ended June 30, 19—•, of $75162.19, and that there was no previous surplus, and that no assess¬ 
ment had been levied. State first, what the net earnings for the current period, available for 
dividends, must have been in order to wipe out the deficit and show the surplus as disclosed 
by the balance sheet. Second, frame the entry that would be made as of December 31, 19—, 
which would balance the account that represented the deficit, and create an account that 
would represent the surplus shown by the balance sheet. 


ADVANCED COURSE 


265 


QUESTIONS 

1 What is a corporation? 

2 Of what is a corporation composed, and how does it differ from a partnership? 

3 How many general classes of corporations are there? State what they are, and describe each 

class. 

4 What advantages and disadvantages do individual and partnership forms of business organiza¬ 
tion possess over the corporate form? 

5 Define a trust; a holding company. 

6 What is meant by government supervision, and how is it exercised ? 

7 How are corporations created? 

8 How are corporations formed? Explain in detail how a corporation may be formed in your 

state. 

9 Explain the difference between a “domestic corporation” and a “foreign corporation.” 

10 How is the capital stock of a corporation represented? Explain the different phases of this 
representation. What is treasury stock? How is it treated on the books? 

11 What is a bond, as the term applies to corporation securities? Describe the different kinds of 
bonds, and state how bonds differ from stocks. 

12 How are the profits and losses of corporations found? How are the net profits distributed? 

13 What is meant by “surplus” ? What purpose does it frequently serve? 

14 By whom are corporations managed? Explain how their authority is obtained. 

15 What are the usual officers of a corporation? The additional officers? 

16 What are the duties of the secretary? How is he sometimes relieved of a part of his duties? 

17 What relation does the treasurer sustain to the corporation? Explain his duties (1) in small 
corporations, and (2) in large corporations. 

18 Is there a system of bookkeeping peculiar to corporations? Give a reason for your answer. 

19 What books are peculiar to corporations, and for what purposes are they used? 

20 What accounts are peculiar to corporations, and what accounts do they take the place of in pro¬ 
prietary and partnership businesses? 

21 What is meant by “good will,” and how is its value determined? How is it treated on the books ? 
How may it be disposed of on the books? 

22 When a going business is transferred to a corporation, what are the names of some of the new 
accounts which will be constructed? 

23 Explain the steps to be taken, and the entries to be made, when a going business is transferred 
to a corporation, and a new set of books is opened. 

24 What entries, when the old books are continued? 

25 What entries would be made when stock is donated to the company and afterwards sold for cash? 
Explain both methods. 



















MANUFACTURING 


Manufacturing is the converting of materials into finished products. All materials in 
their natural or raw state are the products of nature, and when used for manufacturing pur¬ 
poses are called “ raw materials.” Converted materials are called “ manufactured products,” 
or “ finished goods.” Products which are called finished goods in some industries are classed 
as raw materials in others. 

Production. — Production is of two kinds, natural and industrial. Originally, industrial 
production, or manufacturing, was done almost entirely by handicraft, but now machinery 
has largely supplanted hand work in many of the operations. The substitution of mechanical 
for human forces in manufacturing results generally in saving of labor, increase of output, 
reduction in cost, and improvement in products. 

Disposition of Products. — Some manufacturers dispose of their products through jobbers, 
commission merchants, or manufacturers’ agents, while others maintain regular sales depart¬ 
ments, through which their products are distributed to the wholesale trade. Concerns of the 
latter kind are both manufacturers and wholesalers. Still other manufacturers dispose of 
their products direct to the consumers, through the medium of retail stores, established and 
conducted as a part of their business. This class of concerns are both manufacturers and 
retailers. 

The Factory System. — In the early stages of industrial production, manufacturing was 
carried on by the individual, working independently, or by the family working as a unit. Since 
the invention of machinery, and especially of the steam engine, which enlarged the field of 
machine operation, the old systems have been practically superseded by the “ factory system,” 
which combines the forces of labor, machinery, and administration into definite and effective 
units. The factory system is a universal method of industrial production, which can be ap¬ 
plied to practically all kinds of manufacturing. 

Factory Organization. — The purpose of organization is to increase the effectiveness of 
action. It enables a number of persons to operate more effectively as a concrete unit than 
they could as independent units. It permits of division of labor, which, in industrial opera¬ 
tions, results in increase of skill and of productivity. Division of labor also results in special¬ 
izing, or the concentration of thought and effort on a particular thing, thereby greatly increas¬ 
ing the efficiency of the operator. 

The modern factory is a model of industrial organization. It is thoroughly organized as 
to its various departments, and every department is so operated as to contribute its due share 
to the purpose of the factory, and to the success of the business. Consequently the results 
are greater efficiency, increased output, and lower costs. 

Factory Efficiency. — Efficiency, as applied to manufacturing, is based on a comparison 
between the quantity and quality of output, and the time, labor, and money expended upon 
it; or results compared with costs. Efficiency is obtained by saving in labor, the result of 

266 



ADVANCED COURSE 


267 


the use of machinery; by saving in time, the result of the division of labor; by proper or¬ 
ganization and supervision; and by other improved factory methods. 

The efficiency of the human agencies, or workmen, is dependent generally upon their in¬ 
telligence, ability, and skill, and that of the mechanical agencies is dependent generally upon 
their usefulness, construction, power applied, upkeep, and the proper service of the operatives. 
Efficiency is also dependent upon factory conditions, as light, air, space, etc. 

Manufacturing Activities. — The activities of a manufacturer comprise: the purchase 
and use of materials, machinery, and supplies; the application of, and payment for, light, 
heat, and power; of labor, and the supervision of the same; and the distribution of the finished 
products. For these activities, and the expenditures connected with them, careful and sys¬ 
tematic records are kept. A record of the quantities of materials purchased and used, received 
and delivered, is called “ stock keeping,” and a record of the costs for producing the finished 
products is called “ cost keeping.” 

Manufacturing Records. — The records of a manufacturing business relate both to the 
production of the commodities and their distribution, and therefore are more comprehensive 
than are the records of any of the other kinds of business heretofore treated in this book. Some 
manufacturing concerns that are also wholesaling concerns keep one set of books, or records, 
for their manufacturing activities, and another set for their distributing or selling and general 
activities, while others combine the records of all classes of activities in one set. When two 
sets of records are kept, the manufacturing records are usually subsidiary to the other records, 
or regular business books. 

Manufacturing Accounts. — The distinctive account in a manufacturing business is the 
Manufacturing account, which shows on its debit side the cost of materials, the productive labor 
cost, and the manufacturing expenses, and on its credit side the productive cost or the market 
price of the finished products. This account is represented by its subsidiary accounts, Mate¬ 
rials, Labor, and Manufacturing Expenses, or the subdivisions of the latter account, as Indirect 
Labor account, Rent account, etc. 

Other accounts peculiar to a manufacturing business are Machinery and Tools, Repairs 
and Renewals, Patterns, Patent Rights, Pay Roll, Finished Products, Depreciation, and such 
other accounts, real or nominal, as the nature of the business may require. 

Classifying Expenses. — The expenses of a manufacturing business may be classified 
under three heads, manufacturing expenses, selling expenses, and general and administra¬ 
tive expenses; and by constructing accounts to represent these three classes of expenses much 
time, as well as much space in the general ledger, can be saved. The trial balance and the profit 
and loss statement are simplified by this classification, and can be more easily and quickly 
made than when numerous nominal accounts are kept. 

Analysis Book. — When the expenses are classified, as explained above, an analysis book 
is kept. This book contains a summary by months, of the expenses, classified in detail, and 
is compiled from analysis sheets, which are made up from the original records. In this way 
any desired information regarding the expenses of the business can be readily obtained. 

Purchases. — When materials are required in a manufacturing business, this is indicated 
by the receipt of a “ purchase requisition ” from the superintendent of the factory, or of a 
“ stock report ” from the stock keeper. An order called a “ purchase order ” is then sent 
to the producer of, or dealer in, the materials wanted, and a copy of the order is sent to the 
accounting department to be filed until the invoice of goods is received, when it is compared 


268 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


with the invoice after it has been 0. K.'d by the bookkeeper from the stock clerk's report of 
goods received. The invoice is then recorded, and both purchase order and invoice are filed 
either separately or together. A copy of the purchase order is also usually sent to the stock 
department for a record of “ stock ordered." (See forms of purchase order and duplicate 
below.) 

Purchase Order Blank 


B81056 


This Letter and Number 
mutt appear on 
^^jrou^nroice^^^ 


ORDER 


! sL. Boston, . 


1911 


To M 


Send us 

PAY NO ATTENTION 

TO THESE COLUMNS 

<1) 

QUANTITY 




CLASS 

"L-» 

(2) 







(3) 







(4) 







(5) 







(«) 







(7) 





SCO. 

MAIL invoice SAME day THOMAS G. PLANT COMPANY. 

GOODS ARE SHIPPED. 

. 1 Bv ....... purchasing Aoemt. 


If Hurt »ri tnj hwpMw about tin rtow till for NV 


Duplicate Purchase Order Blank 


Date 


TERMS: 


1911 


N? 81056 


£ Jam «- 

INVOICES RECEIVED 
DATES 


Ship 

ll CLASSEN 

DELIVER 






o 






1 












2 






-o- 






3 












4 












5 






— ry 






6 











7 








o 








(duplicate of order.) 

form 286 

Ack’d 

Hurried 


Accepted 

For BiU 

Will .bip 

Delivered 






l 


Record of Invoices. — In a merchandising business, invoices are charged to Purchases 
account, or to the department for which the goods were bought. In a manufacturing busi¬ 
ness, invoices are dissected and the items distributed to various accounts representing the 
purchases for which the transactions were made, as materials, machinery, tools, supplies, 
etc. In like manner, the bills for the expenditures are dissected, and the items distributed 





































































































ADVANCED COURSE 


269 


to their respective accounts. To make this system of records complete, and have it cover all 
the items of purchase and expense, it is necessary to have a voucher for every purchase and 
expenditure, and to make a systematic and comprehensive record of the same. These re¬ 
quirements are provided for by the voucher system of accounting. 

The Voucher System. — During recent years, there has been a great advance in the sys¬ 
tematizing of accounts, and in the proper distribution of the various items of expenditure ; 
and this is shown in its highest stage of development in the voucher system. This system 
requires a voucher for every transaction or for every entry on the principal books, and the 
use ofa“ voucher jacket ” and a “ voucher register.” 

The Voucher Jacket. — A voucher jacket, as its name indicates, is a jacket or cover for 
the voucher, which may be either an invoice or an expense bill. The face of the jacket is 
in the form of an invoice blank, with the form of a receipt blank below. It provides for the 
number of the jacket, name of the creditor, date, particulars, and amount of invoice, signa¬ 
tures of bookkeeper and manager, and for the acknowledgment of payment. Several vouchers 
from the same creditor or several expense bills may be included in one jacket. (See form, 
page 270.) The back contains a form for a brief record of the voucher, and the proper distribu¬ 
tion of the same, which includes the number of the voucher, name of creditor, amount of voucher, 
when paid, check number, and accounts to be charged. 

After the proper records have been made, both on the voucher jacket and in the books, 
the voucher is attached to the jacket, which is then folded with the back out, record side up, 
and filed under “ Unpaid Jackets.” When payment of the voucher is made, the proper record 
is made in the voucher record and on the back of the jacket, which is then sent with the remit¬ 
tance, to be receipted and returned. When the jacket is returned, it is again filed, with the 
original voucher securely attached to it, under “ Paid Jackets.” 

In some voucher systems the voucher jacket is not sent out with the remittance, and hence does not 
contain the receipt blank. 

Many business houses pay all invoices received from the first to the tenth of the month on the tenth, 
those received from the tenth to the twentieth on the twentieth, and those received from the twentieth to 
the end of the month on the first of the following month, and regard these as cash payments; and their 
creditors, having been notified of this method of payment, generally do not object to receiving such pay¬ 
ments and allowing cash discounts. 

Voucher Check 










270 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Voucher Jacket 

No. 2678 St. Louis, Mo., Dec. 1, 1919. 

Gould & Lincoln 

Chicago, Ill. 

In account toiflj THE DARLINGTON SHOE CO. 


Nov, 

1 

Invoice 

net 



275 

85 


20 

< < 

2/10 

345 

85 




30 

6 ( 

2/10 

400 








745 

85 





Zfo 


14 

92 

730 

93 







1006 

78 


CORRECT: APPROVED : 



BOOKKEEPER. MANAGER. 


$1006y% Chicago, Ill., _ 19 19 

3&ccetbch of THE DARLINGTON SHOE CO. 

Ten hundred six and ^_ _ _ _ _ Dollars 


In Full for Above Account 


(Please receipt and return promptly.) 

Back of Voucher Jacket 



















































ADVANCED COURSE 


271 


Payments of vouchers are made by voucher checks, and if a jacket is not returned as 
requested, the check is a receipt for the payment of the voucher. (See form of voucher check, 
page 269.) When a voucher is paid, the usual entry is made in the cash book, with the excep¬ 
tion that the number of the voucher should be written in the number column, the number of 
the check being written in the check number column. (See form, page 275.) 

Voucher Register. — The voucher register contains a record of all vouchers, and is the 
distinctive book of the voucher system of accounts. By its use the purchases ledger may be 
dispensed with; the total amount of Vouchers Payable Credit column, as shown in the reg¬ 
ister, will show the total credits to be carried to Vouchers Payable account, while the total 
amount of Vouchers Payable Debit column in the cash book will show the debits to be carried 
to Vouchers Payable. Of course the amount of the unpaid items in the Vouchers Payable 
Credit column should show at any time the amount of vouchers unpaid, which will be the 
accounts payable of the business, and these can be readily proved by comparing with the 
unpaid vouchers on file. The voucher register is provided with special columns for the num¬ 
bers and particulars of the vouchers, and for the distribution of the amounts. As many columns 
may be provided for distribution purposes as the nature of business, or the classification of 
the accounts, may require. Accounts for which no special columns are provided are entered 
under “ Sundry Debits.” The vouchers are numbered in consecutive order in the special 
number column. (See form, pages 272 and 273.) 

As soon as an invoice or an expense bill has been O.K.’d, a voucher jacket is made out 
and certified by the proper persons, after which the distribution of the amount or items is 
made to the proper accounts on the back of the jacket, and from this the distribution is made 
in the voucher register. 

Some accountants do not record the voucher jackets until the time arrives for the payment of the 
vouchers. 

When the vouchers for the month have been recorded, the Vouchers Payable Credit column 
and the special distribution columns are footed, and the columns ruled off. The total of the 
footing of the Sundry Debits and distribution columns should agree with the footing of the 
Vouchers Payable Credit column. The footing of the Vouchers Payable Credit column is 
posted to the credit of Vouchers Payable in the general ledger. The items in the Sundry 
Debits column and the footings of the various distribution columns, excepting the General 
column, are posted to their respective accounts in the general ledger. The items under Manu¬ 
facturing, Selling, and Gen. Adm. Expenses are posted to the various accounts in the expense 
ledger. A check mark with the folio of the account written over it should be placed opposite 
the footing of each posted column to indicate that the amount has been posted. 

Cash Book. — The form of cash book used in a manufacturing business is essentially the 
same as that used in a wholesale business. It usually contains special columns which adapt 
it to the requirements of the business. The form of cash book shown on pages 274 and 275 is 
well adapted to any manufacturing business where the voucher system is used. It provides 
for a record of the actual receipts and disbursements, and can be easily and quickly audited. 

Imprest Fund. — Every well-conducted office gives a great deal of attention to the proper 
safeguarding of cash. The usual practice is to deposit daily all cash received in whatever form, 
thus making the daily deposit exactly equal the daily receipt. When this is done, all disburse¬ 
ments must be by check, except those which, for the sake of necessity and convenience, must 


272 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Voucher 

Distribution of Voucher Jackets 


PS 






Sundry Debits 



53S 





Vouchers 






go 

Date 

In Favor op 

Explanations 

Payable 

o 





o 

> 




Credit 

1 

Account 

General 

Accts. 

Rec. 


19 — 












2819 


1 

R. T. Prince 

G/A Sal. 70 

2152 

65 







2820 


3 

I. B. Stone 

Inv. 12/1 (off. sup.) 

25 

15 







2821 


5 

A. H. Henry 

Nov. S. 200. Exp. 139. 52 

339 

52 







2822 


12 

Brandt Mfg. Co. 

Inv. 12/10 

164 

50 


M’chy & Equip. 

164 

50 



2823 


19 

Union Leather Co. 

“ 12/14 

562 

19 







2824 


21 

Munn & Son 

“ 12/20 

13 

65 







2825 


25 

Cox Casting Co. 

Bill 12/24 O. Frt. 18. 77 

67 

42 







2826 


27 

J. T. Lyman 

“ 12/26 

118 

75 


Real Estate 

118 

75 



2827 


31 

Imprest Fund 

Dec. disb. 

89 

36 

V 

Accts. Rec. 



2 

50 

2828 


31 

Dodd Leather Co. 

Inv. 12/31 

1362 

75 







2829 


31 

United Shoe M’chy Co. 

Royalties 12/31 

307 

61 







2830 


31 

A. H. Henry 

Dec. S. 200. Exp. 152.60 

352 

60 












13 5556 

15 



283 

25^ 

j?2 

50 
















be made in currency. The currency needed for this purpose is provided in a separate fund 
called a Petty Cash Fund or an Imprest Fund. 

To establish such a fund, a voucher is made out, if the voucher system is used, for an amount 
which it is estimated will be sufficient to meet all currency disbursements for a month; the 
voucher being entered in the Voucher Register as a debit to Petty Cash Fund or to Imprest 
Fund. After proper approval has been obtained, a check is drawn for the amount of the 
voucher and entered in the cash book. This check is cashed and the currency is placed in the 
hands of the petty cashier. 

The fund thus created stands on the general ledger without change unless it is desired to in¬ 
crease or decrease it. The cashier is made responsible for the original fund and must at any 
time be able to produce cash, or cash and petty cash vouchers or receipts, which will exactly 
equal the original fund. 

Petty Cash Book. — This is a special auxiliary book which contains a record of all currency 
disbursements. As currency is paid out for any purpose, a receipt or voucher is procured 
and an entry made in this book. At the close of each month, or earlier if necessary, the Cashier 
summarizes all payments as shown by the Petty Cash Book and supported by the vouchers, 
and turns over the summary, together with the vouchers, to the bookkeeper or treasurer for 
reimbursement. A voucher is prepared for the total amount disbursed, and the proper general 
ledger accounts charged, through the Voucher Register, with the amounts disbursed affecting 
each account. 

The corresponding credit would be to Vouchers Payable. A check is then drawn in 
payment of the voucher and entered in the cash book as a debit to Vouchers Payable. The 
check is cashed and the money turned over to the petty cashier, which restores the cash in 
the fund to its original amount. The petty cash book is balanced monthly. 

Stock Keeping. — The keeping of an accurate record of materials is of special importance 
in a manufacturing business. It serves to show not only the quantities received and used, 
but also the quantities which should be on hand at any time. This not only prevents the 
necessity of taking frequent physical inventories, but also serves as a basis for ordering and 
keeping up stock, and for other purposes, including the checking or proving of the physical 


































ADVANCED COURSE 


273 


Register 

Month OF December 1 Q_ 


Paid 

Prime Cost 

Manufacturing Expenses 

Selling Expenses 

. • ~ ~ 

Gen. Adm. Expenses 

Date 

Ck. No. 

Materials 

Inward 

Freight 

Labor 

Fol. 

Account 

Amount 

Fol. 

Account 

Amount 

Fol. 

Account 

Amount 

Dec. 

1 

1307 





1876 

50 


Ind. Labor 

206 

15 






Office Sal. 

70 



3 

1318 
















Office Sup. 

25 

15 


5 

1324 












S. Salary 

200 




















S. Expense 

139 

52 






19 

1332 

562 

19 


















21 

1340 








Facty. Sup. 

13 

65 










25 

1356 



48 

65 








Frt. Out 

18 

77 






31 

Imp. Fd. 








Misc. Exp. 

46 

18 


Ship. Sup. 

29 

15 


Mis. of Ex 

11 

53 




1362 

75 






Royalties 

307 

61 


S. Salary 

200 




















S. Expense 

152 

60 








71924 

94 

748 

65 

71876 

50 



573 

59 



740 

04 



106 

68 























inventories, thereby detecting waste or theft. Such a record is called a “ perpetual inven¬ 
tory.” 

The nature of the goods manufactured will determine somewhat the kind and form of stock 
books, or of stock records, which should be kept in any particular manufacturing business. 
The stock ledger is the chief book in any stock-keeping system. It contains accounts by 
quantities with every kind of material used in the manufacture of the finished products. 
The debits of these accounts are made from the invoices after they have been checked by the 
receiving department, or from the receiving book or other receiving record, and the credits 
are made from the requisition slips after the requisitions have been filled by the stock depart¬ 
ment, or from the stock journal or other record. 

The card ledger form of record is admirably adapted for use with any stock-keeping system. 
The illustration on this page shows a common form of stock-ledger card. 

A record should be kept of factory supplies, both received and used, and of finished prod¬ 
ucts. The records 
of these three classes 
of stock can be readily 
distinguished by the 
use of different colored 
cards. 

For storing ma¬ 
terial or stock so that 
it can be easily lo¬ 
cated, and conven¬ 
iently obtained when 
wanted, bins are gen¬ 
erally used. The 

bins are arranged in divisions according to departments, and each bin bears a label contain- 
ing the number of the bin, and the name of the material or stock for which it is used. 

Production Methods. — There are two general methods of production in manufacturing, 
called “ the production order method ” and “ the process method.” The production order 


Form op Stock Ledger Card 


Article 

Location 

Unit 

Max. 

Min. 

RECEIVED 

DELIVERED 

Date 

Ordered 

Received 1 

1 Date 

Quantity 

Balance | 

| Date 

Quantity 

Balance 

Date 

Quantity 

Balance 





















































































































374 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Cash 


Date 

Account 

Explanations 

Folio 

1 

Accounts 

Receivable 

Cash Sales 

Discount 
Ion Sales 

Net 

Receipts 

19— 













Nov. 

1 

Balance 

in Exchange Bank 








13942 

26 


2 

G. H. Deane & Co. 

inv. 10/20-2% 


786 

40 



15 

73 

770 

67 


3 

Sales 

L. B. Smith 

V 



132 

60 



*132 

60 


3 

Elgin Trading Co. 

inv. 10/25-2% 


1268 

70 



25 

37 

1243 

33 


4 

Notes Receivable 

Field & Co. disc. 60 ds. 

X 

1500 




15 


1485 



4 

Sales 

Sherwood & Co. 

V 



194 

89 



194 

89 


5 

Dodge & Pond 

inv. 10/26-2% 


942 

80 



18 

85 

923 

95 


5 

Empire Shoe Co. 

on acct. 


500 






500 



6 

Marsh & Cox Co. 

inv. 11/1-net 


1988 

75 





1988 

75 


6 

Notes Payable 

our note 4 mo. disc. 

X 

4200 




43 

70 

4156 

30 



Sundries 


V 

5700 










Accounts Rec. 

Cr. 


5486 

65 









Sales 

Cr. 




327 

49 







Discount on Sales 

Dr. 






59 

95 





Interest 

Dr. 






58 

70 





Cash 

Dr. 








11395 

49 


V 

Balance, Nov. 1 









13942 

26 












25337 

75 


method is used where the nature of the product is such that accurate records can be kept of 
each article or lot from the beginning of its manufacture until it becomes a finished product. 
This method is applicable to a very large list of commodities. The process method is used where 
it would be impossible or difficult to apply the production order method, as where the work¬ 
men’s time on each lot cannot be definitely reported. 

Cost Keeping. — As applied to manufacturing, cost keeping is a systematic record of 
every item of cost connected with the production oi commodities. The principal objects of 
these records are: to determine the actual cost of each article or lot of articles manufactured, 
so as to be able to fix a selling price which will net a desired profit, or to show the profit when 
the selling price is fixed by competition or other causes; to ascertain the productivity and 
efficiency of the productive agencies; to serve as a guide in regulating output and expenditures ; 
and to show where profits may be increased by increase in efficiency, or by reduction in ex¬ 
penditures. 

There are numerous cost keeping, or cost finding, systems applicable to the various lines 
of business, or to different conditions in the same line. Most of these systems are the results 
of careful study, experiment, and experience. The best cost keeping system for any particu¬ 
lar business is the one which will give the desired information with the least expenditure of 
time, effort, and money. Cost keeping may be applied to almost any kind of business, but 
it is especially valuable in a manufacturing business. 

Elements of Cost. — The elements of cost are: prime cost, which is the combined cost of 
materials and direct labor; factory cost, which is direct factory expense added to the prime 
cost; total cost, which includes factory cost, general expense, and selling expense. The selling 
price combines all of the above elements, and the profit. 

The accompanying diagram illustrates the method of building up costs to find a selling 
price which will net a desired profit, or to find the amount of the profit when the selling price 









































ADVANCED COURSE 


275 


Book 


Date 

In Favor op 

Explanations 

Folio 

Check 

No. 

Voucher 

No. 

Vouchers 

Payable 

Disc, on 
Purchases 

Net Dis¬ 
bursements 

19— 













Nov. 

1 

Imprest Fund 

R. T. Prince 


388 

2748 

100 




1001 


1 

Union Leather Co. 

inv. 10/2 net 

V 

389 

2749 

654 30 



654 30 


1 

C. B. Thomas Co. 

Acct. sale and exp. 

yj 

390 

2750 

576 

40 



576 40 


2 

United Shoe M’chy Co. 

inv. 10/2 net 

V 

391 

2753 

431 

62 



43162 


3 

Banning Findings Co. 

inv. 10/12-2% 

V 

392 

275 i 

276 

21 

5 

52 

270 69 


5 

R. B. Johnson & Co. 

inv. 10/13-2% 

V 

393 

2751 

1200 


60 

1140| 


5 

Dodd Leather Co. 

inv. 10/28-5% 

yj 

394 

2754 

1896 

75 

94 84 

1801 91 


5 

R. T. Prince 

Pay roll 

V 

395 

2755 

3600 

50 



3600 50 


5 

Excelsior Thread Co. 

inv. 10/3- 

s 1 

396 

2756 

64 

48 



64 48 



Vouchers Payable 

Dr. 




8800 








Discount on Purchases 

Cr. 






160 

36 





Cash 

Cr. 








8639 

90 



Balance 

in Exchange Bank 








16697 

85 










i 


25337 

75 


is fixed by competition or other causes. In the latter case the producer gets as profit the 
difference between the total cost of the article and the price at which he is obliged to sell 
it, while in the former case he gets the profit he desires to have. 

The selling price represents the whole, or one hundred per cent, and each of the parts of 
which it is composed represents such a percentage of the whole as the cost of the part 
or the ratio of the profit, bears to one hundred per cent. If an article which is priced at 
S5.40 has in it material which cost $1.08, and the other costs were $1.35 for labor, 97.2 cents 
for burden, and $1,198 for expense, and the profit 
was 81 cents, the percentages would be 20, 25, 18, 

22, and 15 respectively. 

Production Order. — The manufacture of goods 
is authorized by a “ production order,” which is issued 
by the office to the factory, and which contains the 
order number, date of order, description of the articles 
to be made, the quantity, etc. There are numerous 
forms of production orders. Those generally used in 
connection with cost systems are designed to contain, 
in addition to the information mentioned above, data 
relating to quantity and cost of material, workmen’s 
time, and cost of operations. Several copies of the 
production order are usually made, one of which is 
sent to the cost department. 

Material Requisition. — The materials required for the articles called for in the produc¬ 
tion order are obtained by each of the different factory departments from the stock depart¬ 
ment by a a material requisition ” made out by the foreman. This requisition contains the 
date, number of the order, name or number of the department, quantity and description of 


Diagram of Cost Finding 


















































276 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


materials required, signature of the foreman, or person who authorized the requisition. After 
the stock clerk has filled and recorded the requisition, it is sent to the cost department. 

Labor Ticket. — The time spent by a workman upon an article or on any part of the 
work is recorded by him on a labor ticket, or time card, which he turns in to the foreman when 
he has finished his work. There are many forms of labor tickets, or time cards, and the form 
used in any business will depend upon the information required, and the conditions under 
which the goods are manufactured. A typical labor ticket, or time card, provides for a record 
of the workman’s name, or number, date, article or part, time spent, or quantity made if piece 
work, rate, amount, and foreman’s 0. K. The purposes of the labor ticket are to determine 
the cost of productive labor and the efficiency of the workmen. After the labor tickets have 
been turned in and recorded, they are sent to the cost department. 

Pay Roll. — A record of the total amount of time worked, or of the total number of pieces 
done by each workman, and the amount of money he has earned is kept in a “ time book ” 
or a “ piece book.” There are numerous forms of pay rolls, and various ways of recording the 
time of the workmen. In factories where the wages are paid by the day or the week, the time 
of the workmen is taken either by time keepers or by means of mechanical time recorders. 
The time keeper records daily in the time book, the time, both morning and afternoon, when 
each employee enters and leaves the factory. The mechanical time recorder registers auto¬ 
matically on a strip of paper or on a card the “ in ” and “ out ” time of each workman, which 
he has “ rung up ” by means of a key or lever punch. 

The pay roll is made up from the time book, or from the time cards or time slips after 
they have been removed from tl. time recorder, and also from the piece book. 

Division of Cost. — For cost keeping purposes, cost has been divided into three parts: cost 
of materials, cost of labor, and indirect expense; also called overhead charges and burden. 
The cost of materials is found through the material requisitions, and the cost of labor through 
the labor tickets. The cost extensions on these requisitions and tickets are made by the cost 
clerks, and a record is made of each article or lot on a “ cost record ” or on a “ cost ledger.” 
The cost record shows the production cost of each article manufactured, and includes the cost 
of materials, the direct or productive labor cost, and the indirect expense or burden. It is 
therefore a record of prime cost of production. The cost ledger shows the productive cost, 
selling cost, and the general and administrative expenses, and is a complete cost record. 

Wage Systems. — There are several systems or plans of paying wages, among the most 
common of which are the day rate plan and the piece work plan. Others are the preferen¬ 
tial, the premium, the bonus, and the profit-sharing plans. 

The day rate wage plan consists of paying the workman a certain rate per day or per 
hour. The piece work plan provides for paying the workman for the exact amount of work 
done by him, measured by the number of articles or parts he turns out. 

The other wage plans are too comprehensive for proper treatment in this book. 

Burden. — The indirect factory expense or burden includes the salary of the superin¬ 
tendent, wages of the foremen and other unproductive or indirect labor, cost of factory sup¬ 
plies, rent, light, fuel, and power, insurance, maintenance or upkeep, taxes, depreciation, 
etc. In other words, burden includes every expense connected with the production of an ar¬ 
ticle except the cost of materials and the direct labor cost. 

The indirect expense or burden cost is found in the accounts in the general ledger. The 
costs of materials, and of direct or productive labor, are found separately in the cost ledger 


ADVANCED COURSE 


277 


and collectively in the general ledger. Separate accounts and separate pay rolls may be kept 
for direct and indirect labor, or only one account and one pay roll may be kept for both; in 
the latter case it would be necessary to analyze the account or pay roll to find the two labor 
costs. 

Distributing Burden. — When the cost of burden has been found, it is distributed over 
each of the articles manufactured during the period in one of several ways. The following are 
some of the methods of distributing burden most commonly used in connection with modern 
cost systems : direct labor cost method ; direct labor hour method; direct labor and material 
method ; new machinery method; new pay rate method. The method to be used will depend 
-upon the wage system under which the factory is operated, the nature of the products, and other 
factory conditions. 

When the direct labor cost method of distributing burden is used, the ratio is found by 
dividing the total burden cost by the total labor cost for any given period. Thus if the total 
burden cost for a month is $3000, and the total labor cost is $6000, the ratio of burden is 50%, 
and this percentage is added as burden to each article manufactured during that month. Hence, 
if the material in one of these articles cost 70 cents, and the labor on it cost 90 cents, the prime 
cost would be $1.60, and the cost of burden would be 45 cents; the cost to make or factory 
cost would be $2.05. 

The direct labor hour method of distributing burden is based on workmen’s time instead 
of labor cost, the hour being taken as the unit of time. The rate per hour is found by divid¬ 
ing the total cost of burden for the period by the total number of labor hours, and the per¬ 
centage thus found is added as burden to the prime cost. This method is regarded by cost 
accountants as more equitable and satisfactory than the direct labor cost method. 

By the direct labor and material method the total cost of burden is divided by the cost of 
both material and labor for the period, to find the percentage of burden. This method is 
practicable only when the material forms the greater part of the prime cost of the article. 

The student is referred to the special books on cost keeping for a further explanation of 
the methods of distributing burden, their treatment here being necessarily brief. 

Production Reports. — When the finished products are sent to the stock rooms, or to the 
sales department, a “ Production Report ” is made out, which shows the names or numbers 
of the goods, the quantities, and the factory cost. From this report an entry is framed in 
the Finished Stock record, or purchases journal, debiting Finished Goods and crediting Ma¬ 
terials, Direct Labor, and Manufacturing Expenses. The Finished Goods account corresponds 
to the Purchases account in a mercantile business. 

When the goods turned over to the sales department are charged to Finished Goods account at market 
price instead of at factory cost price, some nominal account should represent the difference between the two 
prices to show the manufacturing profit. Some accountants use the general Profit and Loss account for 
this purpose, while others construct a special account. 

Goods in Process. — At the end of a fiscal period, the goods in process of manufacture 
are inventoried at their factory cost, and this is found in the same way as for the finished prod¬ 
ucts. 

SHOE MANUFACTURING BUSINESS 

Shoe Manufacturing. — The statements of principles and practices heretofore made re¬ 
garding manufacturing, and the forms illustrated therewith, will apply to almost any kind of 
manufacturing industry. The transactions which follow are especially designed to illustrate 


278 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


the application of these principles and practices to, and the use of some of the forms in, a shoe 
manufacturing business. 

The shoe business was selected to illustrate modern manufacturing because the industry 
of making shoes ranks near the head of the manufacturing activities of the United States. 
This typical American industry employs about $300,000,000 of capital, and over 200,000 
persons, and turns out over 250,000,000 pairs of shoes a year. 

Organization. — The modern shoe factory is usually organized into five departments, viz.: 
Leather Room, where the soles are cut and heel pieces are put together; Cutting Room, where 
uppers and linings are c\it; Fitting Room, where uppers are made (upper parts put together); 
Bottoming Room, where the uppers are lasted, the soles and heels put on, and the shoes finished ; 
Shipping Room, where the sock linings and laces are put in, and the shoes are ironed, dressed, 
inspected, and made ready for shipment. Each room is under the charge of a foreman, and the 
entire factory is under the direction of a superintendent. 

In some of the very large shoe factories, where nearly all of the work is done by machinery, the or¬ 
ganization of the factory and the work done in each department differ somewhat from that described above. 

Materials. — In the manufacture of shoes, leather is the principal material used for the 
outside, and leather and cloth for the inside. Some shoes have cloth uppers, and leather or 
rubber outsoles. Other materials which enter into the making of shoes are thread, eyelets, 
buttons, etc., and are called “ findings.” 

Lasts and Patterns. — For the shaping and making of shoes, lasts and patterns are re¬ 
quired. Lasts are wooden and iron forms, known as “ first lasts,” and “ second lasts.” First 
lasts are the exact sizes and shapes which the finished shoes will be, and are used when the 
uppers are being attached to the soles. The second lasts are only approximately the sizes 
and shapes of the finished shoes, and are used in the supplementary operations, after the shoes 
have been lasted; that is, after the uppers have been sewed to the soles. 

Patterns are used for cutting uppers and linings. This cutting is done by hand in some 
factories, and by machines in others. When machines are used for cutting, dies are used 
instead of patterns. Dies are also used for cutting insoles and outsoles. 

Production. — From the earliest times until about the middle of the nineteenth century, 
footwear was made entirely by hand, with the aid of simple tools, such as lapstone, ham¬ 
mer, awl, and pincers; but during recent years, the ancient way has been displaced by a system 
of machines which turn out perfect shoes by the hundred in the time it took the old-style work¬ 
man to make a single pair. In the making of every good shoe in the modern shoe factory, no 
less than 58 different machines are used. These machines are of the most delicate and intricate 
nature, are nearly human in their operation, and more than human in the accuracy and per¬ 
fection of their results. 

Shoes are made by several processes, and in various styles, sizes, and widths, and the 
customer’s order indicates what is wanted in these respects. Each kind and style of shoe is 
designated by a name and a number, and each shoe bears the factory number and size on the 
top lining. 

Each lot is given an order number, and this number, together with the details affecting 
the preparation of the shoe upper, are written on tags — one for each lot of shoes — which 
are sent to the foreman of the cutting room. Others containing the details regarding the 
sole leather are sent to the leather room, while a third set of tags is sent to the foreman of the 
bottoming room. On the back of each set of tags are printed the names of the different opera- 


ADVANCED COURSE 


279 


Shoe Production Order Tag 




tions covered by the tag, with spaces opposite for the names of the operatives who do the 
work. These tags are production orders; they follow the shoes from one department to an¬ 
other ; then, after being checked, they are sent to the superintendent’s office, and from there 
to the cost department, and finally back to the office from which they originated. 

The form of production order, or shop tags, and the method of distributing them, vary in different 
shoe factories, owing to the difference in the organization of the factories, and in the grades of shoes manu¬ 
factured. In some factories several copies of the production order, which are printed on ordinary paper, 
are fastened to the shop tag, or complete order, the back only of which contains the names of the opera¬ 
tions, and spaces for the names of the operatives. 

The production particulars are typewritten on all copies of the order, by manifolding, and the set is 
sent to the superintendent of the factory, or direct to the leather room, if there is no superintendent. 































































































































280 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


After the soles and heels have been cut out, and the proper records have been made on the back of the 
ta?, the leather order is detached, and the remainder of the set is sent to the cutting room, where it 
is handled in the same way, after which the remainder of the set is sent to the next department, and so 
on until the lot is finished. The shop tag is sent to the shipping room, or packing room, with the finished 
goods. 

Processes. — There are three general processes of sewing the uppers to the soles of the 
shoes by machines, known as the “ McKay Process,” “ Goodyear Welt Process,” and the 
“ Goodyear Turn Process.” 

By the McKay Process, stitches are passed through a groove or channel in the outsole, 
and into and through the underlaps of the upper and insole, inside the shoe. 

By the Goodyear Welt Process, which is similar in method to the hand-sewed process, 
the sole is sewed to a narrow strip of leather called a “ welt,” which has been previously sewed 

along the edge of the shoe, beginning where 
the heel is placed, and ending at the same 
point on the opposite edge. By this process 
the inside of the shoe is left smooth, as the 
stitches are on the outside, instead of on the in¬ 
side, as in the process previously described. 

By the Turn Process the sole is sewed to 
the upper, with both parts turned inside out, 
after which the shoe is turned right side out, 
and finished. As there is no inner sole in 
turned shoes, they are more flexible and easier 
to the foot than are shoes made by the other 
processes. 

Finished Goods. — After the goods are 
finished, they are packed in cartons (paper 
boxes), properly labeled, one pair in each carton, 
and the filled cartons are packed in wooden 

uPOf'.NsoLt cof^f.ll.nq up of insole boxes, or cases, and shipped. 

STITCH UNITING . 

insole uppcr and wcct. In this work, it will be assumed that the 

shoes are made “ on order,” by both the Goodyear Welt Process and the Turn Process, the 
original orders being taken and sent in by traveling salesmen. Duplicate orders, or “ re¬ 
orders,” are sent by the customers direct to the house, or given to the salesmen when they call. 

GENERAL EXPLANATION 

Records. — Only the general records of the business are kept in the accounting depart¬ 
ment. All orders are handled by the sales and shipping departments. The bill and charge 
system is in operation in the sales department. All freight shipments are made under the 
straight bill of lading, unless otherwise required, and all bills are made in triplicate on billing 
machines, the original bill being sent to the customer, the duplicate to the bookkeeper, and 
the triplicate being placed in the sales binder for reference. 

Books Kept. — The books which will be kept in this business are journal, general ledger, 
sales ledger, expense ledger, general cash book, petty cash book, sales journal, voucher register, 
and notes receivable and notes payable books. The forms of these books are illustrated, or 
are the same as before used, except the journal, which has two debit columns, — Notes Re¬ 
ceivable, and General, — and two credit columns, — General, and Accounts Receivable. 












ADVANCED COURSE 


281 


Distribution. — The distribution charges in the voucher register will be made in accord¬ 
ance with the following classifications: 

Real Estate, for cost of all permanent improvements made on the land and buildings. 

Maintenance of Real Estate, for cost of repairs on buildings. 

Machinery and Equipment, for cost of new machinery purchased, boilers, engines, motors, 
inside electric wiring, piping for heat or light, belting, etc., and cost of setting up or installing 
machinery purchased, and for cost of equipment. 

Tools, for cost of new tools, and movable articles used about the factory in connection 
with production, as rollers, trucks, movable scales, time recorders, etc. 

Materials, for invoice cost of all materials used for production purposes, as leather and 
findings. 

Freight Inward, for cost of freight on materials purchased. 

Direct Labor, for cost of productive labor on goods manufactured. 

Office Equipment, for cost of safes, desks, chairs, typewriters, billing machines, adding 
machines, filing cabinets, letter copying devices, time recorders other than those purchased 
for use in the factory. 

Manufacturing Expenses, for cost of all indirect expenses connected with production. 
Some of these expenses are Factory Supplies, Indirect Labor, Fuel, Light and Power, Repairs 
and Renewals, Royalties, etc. 

Lasts and Patterns, for costs of lasts, patterns, and dies. 

Selling Expenses, for cost of expenses connected with the sales of the goods. They include 
salesmen’s salaries and expenses, advertising, circularizing, postage on same, shipping depart¬ 
ment wages and supplies, freight outward, insurance and taxes on finished goods, etc. 

General Administrative Expenses, for cost of administration and general expenses. They 
include salaries of officers and office help, office expenses, office supplies, office postage, tele¬ 
phone charges, telegrams, corporation taxes, etc. 

PRELIMINARY WORK 

December 1 , 19— 

The W. J. Hilton Shoe Company was organized as a business corporation Jan. 1, 19—, 
with a capital stock of $200000, par value, $100 a share, of which $180000 worth has been 
issued. The present stockholders, and their holdings, are as follows: W. J. Hilton, $85000; 
E. M. Hilton, $40000; E. C. Wardner, $35000; (Teacher), $10000; E. M. Merriam, $9000; 
(Student), $1000. 

The president of the corporation is W. J. Hilton; vice president, E. C. Wardner; secre¬ 
tary, R. H. Merriam; treasurer, (Student); manager, (Teacher). 

The members of the board of directors are W. J. Hilton, E. M. Hilton, E. C. Wardner, 
(Teacher), and (Student). 

The salary per year of the president is $3000; of the treasurer, $2400; of the secretary, 
$1800; and of the manager, $3600. 

The low salaries of the officers are due to their large holdings of the stock, which insures their getting 
a proportionately large share of the profits in dividends. If much of the stock were held by outsiders, 
these salaries would be much larger, and more in keeping with the services rendered. 

The business has been continued since its organization, and is at present in active opera¬ 
tion. For the purpose of giving the student practice in making the business records and the 
statements of results of a going manufacturing concern, he will take up the work at the begin- 


282 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


ning of the last month of a fiscal period, and continue it until the end of the period, making the 
records in his own set of books. 

The trial balance taken Nov. 30, 19— shows the following balances in the general ledger. 
You will then enter these balances in your general ledger, allowing one-fourth of a page space 
to each account. Make the date of entry Dec. 1 , 19 — and write Balance in the explanation 
column. 


Trial Balance, November 30, 19— 
The W. J. Hilton Company 


Land 

10000. 


Buildings 

63742.50 


Machinery and Equipment 

55903.25 


Tools 

4376.85 


Lasts and Patterns 

12589.60 


Office Equipment 

3580.40 


Good Will 

30000. 


Materials 

156163.65 


Goods in Process 

84109.20 


P nished Goods 

13416.60 


Freight In 

3339.32 


Accounts Receivable 

43996.47 


Notes Receivable 

4895. 


Interest 

126.70 


Cash 

22582.78 


Capital Stock 


180000. 

Reserve for Depreciation on Buildings 


15943.73 

Reserve for Depreciation on Machinery and Equipment 


2824.55 

Reserve for Depreciation on Lasts and Patterns 


8118.95 

Reserve for Depreciation of Office Equipment 


1064.52 

Reserve for Bad Debts 


2895.10 

Vouchers Payable 


30629. 

Notes Payable 


13500. 

Surplus 


21893. 

Sales 


422189.85 

Returned Purchases 


1362.10 

Returned Sales 

2685.40 


Allowances to Customers 

362.75 


Discount on Sales 

8491.14 


Direct Labor 

132440.60 


Manufacturing Expenses 

20995. 


Selling Expenses 

22616.36 


General Administrative Expenses 

10838.49 


Discount on Purchases 


6831.26 


707252.06 707252.06 


EXPENSE LEDGER 

In order to reduce the number of operating expense accounts in the general ledger, con¬ 
trolling accounts may be opened with each main division of expense, a subsidiary expense 
ledger being provided for the detailed accounts coming under each division. This is a further 
development of the plan of special ledgers, each one being connected with the general ledger 
by means of a controlling account. In addition to a fewer number of accounts to be carried 
in the general ledger, the practice results in a better systematizing of the work, the clerical 
work may be more satisfactorily assigned to different clerks in a large office, and a smaller number 
of special columns is necessary in books of original entry. 





ADVANCED COURSE 


283 


In this set, a subsidiary ledger is used containing three sections for Manufacturing Ex¬ 
penses, Selling Expenses, and General Administrative Expenses, respectively. In the manu¬ 
facturing section, accounts should be opened for the accounts listed below which belong to 
this group, and for other accounts as they arise in the December transactions; likewise in the 
sections for Selling Expense and General Administrative Expense, accounts should be opened 
for each subsidiary account listed in the groups below. Each account should be debited with 
the proper amount under date of December 1, such amounts representing the total expense of 
that class from January 1 to November 30. The total balances of the accounts of each class 
agree with the balances shown by the controlling accounts with the general ledger trial balance. 


Manufacturing Expense 

Jan. to Nov. 

Fuel, Light, and Power, 

3547.50 

Repairs and Renewals, 

1125. 

Royalties, 

6371.20 

Insurance on Machinery, etc., 

203.25 

Taxes on Machinery, Materials, etc., 

216.52 

Indirect Labor, 

4580. 

Factory Supplies, 

4951.53 

20995. 

Selling Expense 

Salesmen’s Salaries, 

10468.70 

Salesmen’s Expenses, 

7906.60 

Shipping Department Wages, 

2200.75 

Shipping Department Supplies, 

1033.40 

Insurance on Finished Goods, 

287.48 

Taxes on Finished Goods, 

223.15 

Freight Outward, 

496.28 

22616.36 

General Administrative Expense 

Office Salaries, 

6416.67 

Office Help, 

3542.85 

Office Supplies, 

185.40 

Insurance on Plant, 

126. 

Taxes, Corporation, 

119.37 

Misc. Office Expense, 

448.20 

10838.49 


Another method of handling detailed expense accounts is by providing a special book for 
Analysis of Operating Expenses. This book would contain the expense items in detail coming 
under each division with twelve parallel money columns for each month of the year. The 
detailed items are transferred each month in total to the proper columns. The Analysis Book 
at the close of the year would show comparative expense items by months for the entire year. 

Accounts Receivable 

In your sales ledger construct accounts with each of the following concerns, allowing 
one-fourth page to each account, and enter on the proper side the date, terms, and amount 
due from each. See that the total of these debit footings equals the amount of Accounts 
Receivable, as shown in your general ledger. 





284 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


The accounts receivable are as follows: 

Hub Shoe Co., Boston, Nov. 25, net 30, 2/10, 2786.45 

Dodge & Rice, Boston, Aug. 4, 4 mos., 4210. 

Pond & Eaton, Boston, Nov. 3, net 30, 1782.45 

Providence Boot & Shoe Co., Providence, R. I., Oct. 5, net 60, 1242.50 

E. F. Woods & Co., Providence, R. I., Nov. 24, net 30, 1446. 

Sam Stone & Co., Danbury, Conn., Nov. 20, net 30, 2/10, 798.50 

Geo. H. Deane & Co., Hartford, Conn., Nov. 28, net 30, 2/10, 1342.75 

New Haven Trading Co., New Haven, Conn., Nov. 27, 2/10, 2836.70 

E. M. Lyons & Co., New Haven, Conn., Oct. 30, net 30, 628.50 

Bay State Shoe Co., Worcester, Mass., Nov. 25, 3/15, 3245.50 

Marsh, Fielding Co., Chicago, Nov. 15, 2/30, 4697.50 

Quaker Shoe Co., Philadelphia, Nov. 18, 3/30, 6255.75 

Hamilton, Brown Shoe Co., St. Louis, Mo., Oct. 1, sight draft 60 ds., 4875.20 

Pittsburgh Furnishing Co., Pittsburgh, Pa., Nov. 20, 2/15, 4219.70 

Rich, Lantz & Harris, Cleveland, O., Sept. 14, 90 ds. net, 3628.97 


Unpaid Vouchers — Vouchers Payable 

In your envelope marked “ Voucher Jacket File ” you will find invoices from other persons 
which make up Vouchers Payable, as shown by the credit side of Vouchers Payable account 
in the general ledger. Remove these invoices from your envelope and prepare a voucher 
jacket for each invoice, according to the instructions given below. (See form of voucher 
jacket and back of same on page 270, and read again what is said on page 269 regarding the 
voucher jacket.) No purchases ledger will be used in this work, as the voucher register takes 
the place of that book. 

No. 2780. — Invoice, J. Russell & Co. Number the voucher jacket, but do not date it. 
You will be instructed to do that later. Next write the name and address of the creditor, 
date of the invoice (in the left-hand date column), and on the same line write the word Invoice, 
the terms, and the amount. Attest the correctness of the record on the jacket by writing 
your name on the line over the word “ Bookkeeper,” and have your teacher, or whomever he 
may designate, sign as manager. Number the voucher jacket 2780. 

An analysis of the invoice shows that it represents a purchase of machinery and equip¬ 
ment, amounting to $283.57, of tools, $3.75, of materials for use on addition to factory, $6.88. 
These and the other facts should be recorded on the back of the voucher jacket. Write the 
number, and the amount of the voucher, and the name of the creditor on the top of the form, 
on the back of the jacket. Next write Machinery and Equipment, $283.57, on the first blank 
line under Sundries, Tools, $3.75, on the next line, and Real Estate, $6.88 on the following 
line, and November (current year) on the top line. You have now completed the work on 
the voucher jacket for the present, and made the distribution of the invoice. 

Pin the invoice face upward on the front of the voucher jacket, fold the same and place 
it in your Voucher Jacket File. 

No entries will be made in the voucher register for the unpaid vouchers on hand at this 
time, as they represent the business of the preceding month, at which time proper records 
were made on the books. 

No. 2781. — Invoice, Bracket Mfg. Co. This shows a purchase of production materials. 
Prepare a voucher jacket in general accordance with the instructions given above. 


ADVANCED COURSE 285 

No. 2782. Invoice, Parry Bros. & Co. This represents a purchase of materials to be 
used in enlarging the factory. 

No. 2783. — Invoice, Cutler & Porter. Proceed as in No. 2781. 

No. 2784. Bill, Frank C. Perkins. Charge the full amount to Machinery and Equip¬ 
ment under Sundries. 

Nos. 2785, 2786, 2787, 2788. — Invoices, Collieson Bros.; Cutler & Porter; H. M. Sciple 
& Co.; Collieson Bros. 

When in doubt about the distribution of an invoice, see Distribution, page 281. 

No. 2789. — Invoice, National Brass and Iron Works. Charge to Office Equipment under 
Sundries. 

In order to take advantage of discounts allowed on purchases, or to pay invoices promptly when due, 
it is customary to either file the invoices under proper dates, usually a few days before maturity, in “tickler 
files,” or to record them under proper dates in a “tickler” book. A tickler file has numerous compart¬ 
ments, numbered to correspond to the days of a month, with the name of the month on the outside. The 
tickler is usually an ordinary record book, the months and days being written in it as required. 


Notes Receivable 

In your envelope marked “ Cash Drawer ” you will find the following notes which consti¬ 
tute the Notes Receivable balance in the general ledger: 

Nos. 233, 234, 235, 236. Take these notes from your envelope and enter them in your 
notes receivable book, after which return them to the envelope. See that the footing of the 
amount column in your notes receivable book agrees with the balance of the Notes Receivable 
account in the general ledger. 

Notes Payable 

The following notes are outstanding and constitute the Notes Payable balance in the 
general ledger. Enter the notes in your notes payable book, and see that the total agrees with 
the balance of the Notes Payable account. 

No. 174. — Date, Nov. 1, in favor of E. J. Leonard, for money borrowed, payable at your 
office on demand, with interest, at 6%, $5000. 

No. 175. — Date, Nov. 10, in favor of the Commercial Bank, for money borrowed, pay¬ 
able at the Commercial Bank in 30 days, $3500. 

No. 176. — Date, Nov. 20, in favor of the Commercial Bank, for money borrowed, payable 
at the Commercial Bank in 30 days, $5000. 

No. A I. — Enter the balance of cash, which is the balance in the bank, in your cash book 
and on the stub of your check book, extending the amount into the net receipts column in 
the cash book and on the left stub of the check book. You will keep the debit of the account 
with the bank on the left stub of your check book in this work, and the credit of the account 
on the right stub. 


TRANSACTIONS 

December 1, 19— 

No. 1. — Check. Sam Stone & Co. Payment of invoice of November 20. 

Enter the check in the cash book, crediting Sam Stone & Co., for the full amount of the in¬ 
voice in the Accounts Receivable column, and debiting Discount on Sales in the special column 
for the amount of the discount. Extend the amount of the check into the Net Receipts column. 
All payments by customers who discount their bills will be handled in this manner in the follow- 


286 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


ing transactions; and in every case, the net or actual amount of cash received will be entered 
in the Net Receipts column, as well as in the other column to which it belongs. 

Some of the larger business concerns divide the general cash book into two books, one of which is 
called the “credit cash book,” and is used for a record of the receipts; the other is called the “debit cash 
book,” and is used for a record of the payments. The general cash book or books are kept by the cashier 
or treasurer, but the posting is done by the bookkeepers. This is called an “internal check,” and provides 
for the checking of the work of one employee by another, the object being to prevent fraud or peculations 
on the part of those who handle the cash of the concern. 

Keep your books posted to date. 

No. 2. — Regular weekly pay roll. 

Prepare a voucher jacket No. 2790, payable to R. H. Merriam. Date it both at top and 
side with the current date, and write Pay Roll in the explanation column, and the proper amount 
in the outside money column. Attest the jacket and have it approved by the manager. It 
is unnecessary to fill out the receipt form at the bottom of this jacket. 

Acting as treasurer make a voucher check (see form on page 269) to the order of the secre¬ 
tary for the amount of the voucher. Number the check, and write on it the number of the 
voucher in the proper place, and enter it in the cash book. (See illustration of cash book on 
page 274.) Be sure to write the number of the check and the number of the voucher in their 
respective columns in the cash book, and to extend the amount into both the Vouchers Payable 
debit column and the Net Disbursements column. Check the entry. Place the check in 
Vouchers for Others. 

Fill out the back of the jacket by writing the number, amount, name of payee, when paid, 
and number of the check. Charge $2831.50 to Direct Labor, $110 to Indirect Labor, under 
Manufacturing Expense, $115 to Ship. Dept. Wages, under Sell. Exp., and $72 to Salaries, 
under Gen. Adm. Expenses. 

Next enter the voucher jacket in the voucher register as shown in the illustration on pages 
272 and 273, extending the total amount into Vouchers Payable Cr. column, and the amounts 
of the separate items into the proper distribution columns. Write S. D. Wages $115, in the 
Account column under Selling Expenses and Off. Sal. $72 in the Account column under Gen. 
Adm. Expenses. Write the date, and the number of the check, in the proper Paid columns. 
Next write the current month and year at the top of the back of the voucher jacket, to show 
that it has been recorded. Pin the pay roll to the jacket, fold the same, and file in the Paid 
Voucher Jacket File. 

No. 3. — Invoice, J. H. Steele & Co. For office supplies. Prepare a voucher 
jacket. Number the jacket with next consecutive number. Make the proper record on 
the back of the jacket, charging the purchase to Office Supplies under General and Adm. 
Expenses. 

Record the jacket in the Voucher Register, writing Inv. 12/1 in the Explanations column, 
the name of the account (Office Supplies) and the amount under General and Administra¬ 
tive Expenses. As treasurer draw a voucher check for the amount of the bill, and enter it 
in the cash book. Write the name of the creditor in the Name column, Invoice 12/1 net, in the 
Explanations column, the number of the check, and the number of the voucher, in their re¬ 
spective columns, and the amount in the Vouchers Payable column and in the Net Disburse¬ 
ments column. Check the entry, since it will not be posted, as you are not keeping a 
purchases ledger. All payments to creditors whose invoices we discount will be handled in 
this way; in every case the actual amount paid will be entered in Net Disbursements col¬ 
umn, as well as in the other column to which it belongs. 


ADVANCED COURSE 


287 


Complete the record on the jacket. Fill out the receipt blank, excepting the date and 
signature, attach the check to the jacket, and place in Vouchers for Others. File the invoice 
in Paid Vouchers File. 

No. 4. — Duplicate charge bill, Dodge & Rice. Enter in the sales journal, numbering 
the entry and the bill, 3975, and charge direct to the account in the sales ledger from the bill. 
Number the bills consecutively. 

F. O. B. — The abbreviation F. 0. B. or f. o. b. means free on board; that is, the goods are to be 
delivered either free to the transportation company at the place of shipment, or free of cartage and trans¬ 
portation charges to the place of destination, depending upon the agreement of the parties or the custom 
in the trade, and this is indicated by the name of the place following the abbreviation. 

In the above case the goods are to be delivered free at Boston; that is, free to the place of destina¬ 
tion, but the delivery does not include cartage from the freight house or dock of the transportation com¬ 
pany to the warehouse or store of the purchaser. 

On f. o. b. receiving point shipments, the transportation charges are usually prepaid by the shipper, 
but if not so paid, as in the above case, they are paid by the customer, who deducts the charges from the 
invoice at the time of settlement, sending the freight expense bill with his remittance. 

No. 5. — Pay voucher No. 2780. 

Take voucher jacket No. 2780 from the Voucher Jacket File, detach it from the invoice, 
date it at the top (current date), and draw a check for the amount. Fill out the receipt blank, 
excepting the date and signature, and attach the check to the jacket. Complete the record 
on the back of the jacket, and make the proper record in the cash book. Remember to check 
the entry in the cash book. 

Place the voucher jacket in Vouchers for Others, and the invoice in Paid Vouchers File. 

No. 6 . — Draw a check, favor of the secretary, R. H. Merriam, for $50 for petty cash uses. 
Charge Imprest Fund in Cash Book in net disbursements column. (See explanation of 
Imprest Fund, page 271, and illustration of entry on page 275.) 

You will assume that Mr. Merriam has had the check cashed and has turned in the cur¬ 
rency. You will not be required to handle the petty cash in this work, but will make the 
records in the petty cash book. Enter the amount in the left-hand money column of the 
Petty Cash Book, writing for explanation, Rec’d from Imprest Fund. 

The petty cash book is usually kept by the cashier’s assistant, but it may be kept by another, and 
there may be more than one such book in use. Of course, the person in charge of the petty cash book 
would handle the cash and make the payments, which should be supported by proper vouchers. 

December 3 

Nos. 7, 8 . — Duplicate charge bills, Hamilton, Brown Shoe Co.; E. F. Woods & Co. 
(See No. 4.) 

Remember to post all charge sales direct from the bills, as soon as the bills are received 
and entered in the sales journal, and to post daily all credits to customers, so that the accounts 
will show their true current condition. Also to keep the cash book posted to date. 

No. 9 — Memorandum, J. W. Evans, traveling salesman, salary and expenses for Novem¬ 
ber. Prepare a voucher jacket, draw a check, and make the proper entry in the cash book 
extending the amount into both the Vouchers Payable column and the Net Disbursements 
column. Check the entry. Under Selling Expenses on back of the jacket, charge $350 to 
Salesmen’s Salaries and $2^1.27 to Salesmen’s Expenses. Record the voucher in the Voucher 
Register, extending the items to the proper accounts under Selling Expenses. 

Remember to enter the date and number of the check in the Date column when a voucher 
is paid, and to complete and file the voucher jacket. 


288 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 10. — Memorandum, J. L. Marcy, traveling salesman, salary and expenses for No¬ 
vember. Proceed as in No. 9. 

The above expense bills are properly chargeable to the November business, but excepting for cost 
keeping, and other statistical purposes, there is no objection to charging them to the December business 
since they will in either case be included in the expenses of the current fiscal period. Some accountants 
do not close the voucher register until all bills for the month have been recorded. 

No. 11. — Invoice, Frank C. Perkins. Charge to Machinery and Equipment. 

Nos. 12, 13. — Bill, City Gas and Electric Co. Invoice, E. A. Conway Coal Co. Charge 
each to Fuel, Light, and Power under Manufacturing Expenses. 

No. 14. — Invoice, Western Leather Co. 

No. 15. — Pay vouchers Nos. 2795, 2796, 2781, 2785. Deduct the discount from the gas 
bill. 

No. 16. — Petty cash memorandum. Enter each item in your petty cash book, extending 
the amount into the right-hand money column. Make proper explanation of each entry. 
(See No. 6.) 

No. 17. — Check, Pond & Eaton. See their account in your ledger and enter accordingly. 

No. 18. — Deposit all cash on hand. Indorse the note of the Providence Boot & Shoe 
Co. and leave it at the bank for collection. Make the proper record in your notes rec. book. 

Before making a deposit, the cash should be proved. If your cash does not prove at any time and 
you are unable to find the cause of the “over,” or “short,” adjust the same, as heretofore explained. 

Make the entry in detail in the check book for the deposit. 

December 4 

No. 19. — Invoice, J. Russell & Co. Pay this bill. Charge the waste to Factory Supplies 
under Manufacturing Expenses. 

No. 20. — Duplicate charge bill, Marsh, Fielding Co. 

Freight Prepaid. — The prepayment of transportation charges is usually a matter of agreement be¬ 
tween purchaser and seller, but it is sometimes a custom in the trade, or a necessity, as in cases where there 
are no freight or express agents at the delivery points. Freight charges may be prepaid as the result of 
agreement or custom, or as an accommodation to the purchaser. In the first case, they are charged to 
Selling Expenses, usually through a special Freight Paid-Expense account, or a general Freight Outward 
account, which is analyzed at the end of each month. In the latter case they are charged to the customer. 

The prepayment of transportation, and the disposition to be made of the charges, are indicated on 
the shipping order; as, “FreightPaid-Expense,” “Express Paid-Expense,” or “Freight Paid and Charge,’ 
or “Express Paid and Charge,” or by other definite similar expressions. 

December 5 

No. 21. — Check, Providence Boot & Shoe Co. See their account and apply the pay¬ 
ment accordingly. 

No. 22. — The bank notifies you that the sight draft on the Hamilton, Brown Shoe Co., 
St. Louis, for $4875.20, which was drawn Nov. 27, has been paid, and the amount placed 
to your credit, less collection, $5.25. Charge General Administrative Expense. Make the 
proper entry in the cash book for the sight draft, extending the amount into the Accounts 
Receivable and Net Cash Receipts columns, and in the check book for the credit. Show in 
the check book the total amount of the draft, and the collection, as well as the net amount, so 
that the entry can be easily audited. 

Nos. 23, 24. — Duplicate charge bill, Dodge & Rice. Pay vouchers Nos. 2788, 2789. 


ADVANCED COURSE 


289 


No. 25. — Invoice, Charles Koss & Bro. Charge Shipping Supplies, under Selling Ex¬ 
penses, and explain in Explanations column. 

No. 26. — Statement, United Shoe Machinery Co. Pay the amount. Charge Royalties, 
under Manufacturing Expenses. 

The Royalty System. — Most of the machines used in the “Bottoming Room,” instead of being 
bought outright, as are most of the machines in the “Fitting Room,” are leased from the manufacturers, 
who charge a certain sum per shoe for the use of each machine. This charge is called a “royalty,” and 
ranges from f of a cent to 6 cents on a shoe. Manufacturers of leased machines keep them in repair, and, 
of course, bear any loss by depreciation. 

By the royalty system, the shoe manufacturer has the use of the leased machines without having 
any of his capital invested in them, and has no charges to pay for repairs, nor allowances to make for 
depreciation. 

Each leased machine has a device attached to it for registering the number of shoes on which the 
machine has operated, and from this register the royalty record of the machine is made. 

No. 27. — Invoice, A. D. Jackson Saddlery Co. Pay this invoice less discount. 

December 6 

No. 28. — Invoice, Parry Bros. & Co. This material is for use in enlarging the factory. 

Nos. 29, 30. — Invoice, Cutler & Porter. Duplicate charge bill, George H. Deane & Co. 

No. 31. — Cash sale, J. T. Ferris. Enter in the cash book only, extending the amount 
into the Cash Sales and Net Receipts columns. Check the entry. (See page 274.) 

No. 32. — Petty cash memorandum. (See No. 16.) 

December 7 

No. 33. — Invoice, F. A. Walsh & Co. (Be careful about the distribution.) 

Nos. 34, 35. — Duplicate charge bills, Rich, Lantz & Harris; New Haven Trading Co. 

The freight charges on No. 34 were prepaid and charged to the customer, as shown by 
the duplicate charge bill. Enter only the amount of the sale in the Item column of the sales 
journal, and on the next line write Freight outward, on above, and place the amount, $5.36, before 
the Item column. Carry the freight outward items along until the end of the month, then 
credit the amount to Selling Expenses (Freight Outward). 

When the freight charges are prepaid at the time the goods are delivered to the transportation com¬ 
pany, the receipt is acknowledged on the bill of lading, and memorandum copy, by the agent or cashier 
of the company. When the shipper has an account with the company, he stamps “To be Prepaid and 
Charged to {shipper) ” on the bill of lading, to the right of the description of articles, etc. 

In this business The City Carting Company attends to all freight and carting matters, 
and renders monthly statements. The signed and receipted bills of lading, and memorandum 
copies, are turned in by them to the shipping department daily. 

No. 36. — Letter, check, and note, with interest added, Dodge & Rice (see their account). 

• December 8 

No. 37. — Check, The Hub Shoe Co. See their account. 

No. 38. — Draw on E. M. Lyons & Co. at sight, for invoice of Oct. 30, and leave the draft 
at the bank for collection. Deposit all cash (currency and checks) on hand. Write or dictate 
a letter to E. M. Lyons & Co., notifying them that you have drawn on them and requesting 
that they honor the draft. 


290 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 39. — Pay roll. 

No. 40. — Invoice, Diebold Safe Co. Pay the invoice. 

Nos. 41, 42. — Duplicate charge bill, E. F. Woods & Co. Cash sale (check), Wm. 
M. Lee & Co. 

Nos. 43, 44. — Checks, Pittsburgh Furnishing Co.; New Haven Trading Co. Be sure to 
refer to the account in the ledger before entering a remittance. 

December 10 

Nos. 45, 46. — Invoices, Western Leather Co.; Charles Koss & Bro. 

No. 47. — Check, Geo. H. Deane & Co. 

Nos. 48, 49. — Deposit all cash on hand. The bank notifies you that your note in their 
favor for $3500, due to-day, has been charged to your account. 

No. 50. — Pay vouchers Nos. 2794, 2783, 2782, 2797. 

December 11 

Nos. 51, 52. — Invoice, Collieson Bros. Duplicate charge bill, Bay State Shoe Co. 

December 12 

Nos. 53, 54. — Invoice, O’Neil Oil & Paint Co. Cash sale, Jones & Allis. 

No. 55. — Check, Dodge & Rice. Payment, bill Dec. 1, less freight charges. Treat the 
deduction from the bill as a discount on sales. 

Other ways of recording a deduction of this kind would be to charge it to Freight Outward, or to 
Allowances to Customers through the journal. By any of these ways, however, the proper deduction 
from revenue would be shown on the books. 

No. 56. — Note, Providence Boot & Shoe Co. and protest, petty cash memo. 

Charge the protest fees to the Providence Boot & Shoe Co., in the petty cash book. 

Post the entry. No entry is required for the note since it was merely left for collection. 

Make proper notation in the bill book. 

Write or dictate a letter to the Providence Boot & Shoe Co. requesting an explanation for 
allowing their note to go to protest. 

No. 57. — Deposit all cash on hand. Leave the note of Dodge & Rice, due on the 14th 
inst., at the bank for collection. 

No. 58. — Pay vouchers Nos. 2784, 2799, 2810. 

December 13 

No. 59. — Invoice, A. D. Jackson Saddlery Co. Pay the invoice. 

No. 60. — Duplicate charge bill, Hamilton, Brown Shoe Co. The terms are special. 

No. 61. — Letter, check, and note, Bay State Shoe Co. Eqter the full amount of the 
discount in the cash book. 

December 14 

No. 62. — Cash sale, Chas. D. Pomeroy. 

No. 63. — Pay vouchers Nos. 2802, 2803. 

No. 64. — Check, The Hub Shoe Co. Payment of note as per bill book. Take the note 
from your Cash Drawer, write “ Paid ” across the face, and place it in Vouchers for Others. 



ADVANCED COURSE 


291 


No. 65. — Deposit all cash on hand, and leave at the bank for collection E. F. Woods & 
Co.’s note, due 20th. Have the Quaker Shoe Co.’s note, due Jan. 15, discounted, and the pro¬ 
ceeds placed to your credit. 

Enter the face of the note in the Accounts Receivable Cr. column, the amount of the dis¬ 
count in the Discount on Sales column, and the proceeds in the Net Cash Receipts column, 
with proper explanations to support the records. Place a small cross mark in the folio column 
to indicate the special amount. (See page 274.) Post Notes Receivable entries as usual. 

In this work, discount on notes will be treated as interest, and will be charged or credited to Interest 
account. The amount of discount in each case will be entered in the Discount on Sales column of the cash 
book on the same line with the note, and a cross mark will be placed in the folio column. The Discount 
columns will be analyzed at the end of the month, and the proper amounts placed as footings of the columns. 
The Accounts Receivable column will be analyzed in the same way. (See cash book, page 274.) 

This manner of treating discount on notes permits of the cash book showing, in the Net Receipts and 
Net Disbursements columns, the actual cash received and disbursed, and, therefore, admits of rapid and 
easy auditing. 

December 15 

Nos. 66, 67, 68. — Invoice, B. S. Green Co. Pay roll. Duplicate charge bill, Sam Stone 
& Co. 

Nos. 69, 70, 71, 72. — Checks, Rich, Lantz & Harris; E. F. Woods & Co.; Marsh, Field¬ 
ing Co.; Hamilton, Brown Shoe Co. 

No. 73. — Pay voucher No. 2804. 

No. 74. — Petty cash memorandum. Your draft on E. M. Lyons & Co. was protested for 
nonpayment. (See No. 56.) 

December 17 

Nos. 75, 76, 77. — Invoice, H. M. Sciple & Co. (Machinery and Equipment.) Duplicate 
charge bill, Pond & Eaton. Check, Dodge & Rice. 

No. 78. — Letter and check, E. M. Lyons & Co. 

No. 78 a. — Deposit all cash on hand. 

No. 79. — Letter, Providence Boot & Shoe Co. Acting on instructions from the manager, 
you will write or dictate a letter to the Providence Boot & Shoe Co., expressing regret at their 
failure, and accepting their offer of 60 cents on a dollar, for your book claim and their note 
protested on the 12th inst. 

December 18 

Nos. 80, 81. — Duplicate charge bill, E. B. Lewis & Co. Check, Geo. H. Deane & Co. 

No. 82. — Pay vouchers Nos. 2807, 2808. 

December 19 

Nos. 83, 84. — Invoice, J. H. Steele & Co. Invoice, F. A. Walsh & Co. 

Nos. 85, 86, 87. — Duplicate charge bill, Pittsburgh Furnishing Co. Check, Quaker Shoe 
Co. Petty cash memorandum. 

December 20 

Nos. 88, 89, 90. — Invoice, Boston Last Co. Cash sale, R. S. Sherwood & Co. Duplicate 
charge bill, Bay State Shoe Co. 

No. 91. — Letter and check from New Haven Trading Co. See their account in the ledger 
for the terms. Give them credit for $1530.61. 

Divide the remittance by 100 %, less the rate of discount allowed by the terms, and credit the customer 
for the amount represented by the quotient (as, $ 1500 -r .98 = $ 1530.61). 


292 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


No. 92. — Deposit all cash on hand. 

No. 93. — Your note due to-day, favor of your bank, has been charged to your account. 

December 21 

Nos. 94, 95, 96. — Invoice, Western Leather Co. Duplicate charge bill, The Hub Shoe 
Co. Check, E. F. Woods & Co. 

December 22 

Nos. 97, 98. — Pay roll. Cash sale, Hudson & Foster. 

December 24 

Nos. 99, 100. — Invoice, Chas. Koss & Bro. Duplicate charge bill, Empire Shoe Co. 

No. 101. — Check, Providence Boot & Shoe Co. In full payment of the bill of Oct. 5, and 
their note protested of Dec. 12. The check is for 60% of these two amounts, as per agreement. 

Enter in the cash book, Providence Boot & Shoe Co. for 60% of bill, and Notes Receivable 
for 60% of note. You have lost 40% of the note, and 40% of the bill of Oct. 5 ; also the pro¬ 
test fees. Losses from bad debts are provided for by a Reserve for Bad Debts account, which 
is credited at the end of each fiscal period with a certain proportion of the profits of the busi¬ 
ness, and charged with such losses as may occur during the period. Therefore, in your journal, 
frame an entry, Reserve for Bad Debts, for the total loss, and Providence Boot & Shoe Co., for 
the loss on the book account, including the protest fees, and Notes Receivable, for the loss on the 
note. 

No. 102. — Pay vouchers Nos. 2786, 2787,and 2809. 

No. 103. — Deposit all cash on hand. The note of E. F. Woods & Co., which was left for 
collection, has been paid, and the amount placed to your credit. 

December 26 

Nos. 104, 105. — Invoice, J. Russell & Co. The nails are for use in enlarging the factory; 
the belting is an addition to the equipment. Pay the bill. Invoice, Collieson Bros. 

Nos. 106, 107, 108. — Duplicate charge bills, The John Warner Co.; Quaker Shoe Co.; 
Pittsburgh Furnishing Co. 

Nos. 109,110, 111. — Checks, E. F. Woods & Co.; Sam Stone & Co.; Hamilton, Brown Co. 

December 27 

Nos. 112, 113, 114. — Invoice, Cutler & Porter. Duplicate charge bill, Sam Stone & Co. 
Check, Rich, Lantz & Harris. 

Nos. 115, 116. — Check, New Haven Trading Co. Intended to pay balance of bill Dec. 7, 
less special discount, 1%, $5.12. (See their account.) Pay voucher No. 2816. 

December 28 

Nos. 117, 117 a. — Cash sale, B. F. Howe & Co. Memo, of goods returned, The Hub 
Shoe Co. 

Nos. 118, 119. — Pay voucher No. 2815. Deposit all cash on hand. 

December 29 

Nos. 120, 121, 122. — Pay roll. Duplicate charge bills, E. M. Lyons & Co.; Rich, Lantz 
& Harris. 


ADVANCED COURSE 


293 


No. 123. — Check, Bay State Shoe Co. In payment of invoice, Dec. 11. Refer to their 
account, and see if the remittance is correct. 

There are two methods of treating overpayment. One is to return the amount of the over¬ 
payment by check, or in currency if the amount is small, and the other is to credit the cus¬ 
tomer’s account for the amount of the overpayment. You will follow the second method in 
this case. 

Frame an entry in the cash book for the correct net amount of the invoice, and for the dis¬ 
count, and another entry for the overpayment, with proper explanation. Notify the customer 
of the error, and state how you have treated it. 

Nos. 124, 125. — Pay voucher No. 2818. Petty cash memo. 

December 31 

Nos. 126,127,128. — Duplicate charge bill, Marsh, Fielding Co. Cash sale, W. P. Hoyt & 
Co. Pay voucher No. 2820. 

No. 129. — Bill, City Carting Co. Pay this bill. Charge Freight Inward, $243.52. 
Freight Outward, $38.48, in voucher register. 

Nos. 130, 131, 132. — Memo, goods returned, Empire Shoe Co. Bill, Mead, Mason & Co., 
for addition to the factory. 

Pay this bill. Deposit all cash on hand. 

No. 133. — The salaries of the officers and general manager for the month are due. Pre¬ 
pare a voucher jacket, and draw the checks. One-third of the general manager’s salary is 
charged to Mfg. Expenses (Indirect Labor). 

The transactions for the month, and also for the fiscal period, are now completed, but all 
of the records have not been made. It usually takes a few days in which to get the reports 
from the different departments, showing cost of goods manufactured during the month, and 
of goods in process, the value of finished goods, materials and factory supplies on hand, the 
amount of wages and salaries accrued, inventories of office equipment and officp supplies, and 
the salary and expense accounts of the traveling salesmen. 

In the meantime, the transactions of the next month would be taking place, and be recorded 
in the books of original entry. In this work, only the business of the fiscal period ending Decem¬ 
ber 31 will be considered, and therefore no records will be made for the transactions of the next 
period. 

You will now pencil foot your petty cash book; and analyze the entries, preparatory to 
transferring them to the voucher register. Rule a sheet of analysis paper with four columns, 
which you will head, Accts. Rec., Real Estate, Mfg. Exp., Gen. & Adm. Exp., respectively, and 
enter in these columns the items which appear in the petty cash book, including the personal 
accounts items. 

Be careful about the classification of the items, and when in doubt, refer to Distribution, 
page 281. Note the item of factory supplies. 

Next, rule off and foot the analysis sheet, after which enter the titles of the accounts and 
the footings of the columns in the explanation column of the petty cash book, writing Summary 
over the entry. Single rule and foot the summary to show that it agrees with the pencil foot¬ 
ing of the disbursements column. Next balance and rule off the petty cash book, and on a slip 
of paper make a memorandum of the summary under the current date. Pin the memorandum 
to the petty cash vouchers, and prepare a voucher jacket, using, for explanation, Petty cash dis¬ 
bursements, December, 19—, for total amoi nt, and distributing according to the summary. 
(Don’t forget the factory supplies item.) 


294 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Enter the voucher jacket in the voucher register as follows: After writing the number 
and the date ih the proper columns, write in the In Favor of column Imprest Fund, in the Ex¬ 
planations column, Dec. disbursements, in the Vouchers Payable Cr. column, Total amount , 
in the Account column, Accounts Receivable {amount), and check the entry, as the items com¬ 
prising the amount have already been posted, and the amount will be posted in the footing 
of the special column. 

Extend the other distribution items into their respective columns, and write the current, 
date in the Paid date column. 

Draw a check payable to the cashier and enter in the cash disbursements. 

Nos. 134, 135. — Memorandums, J. W. Evans, J. L. Marcy. Prepare voucher jackets, 
and enter. These expenses are to be charged to the December business, but as the reports 
are received after the close of the month, the vouchers will be paid in the next fiscal period. 

Pencil foot the voucher register and prove the footing. The amount of the Vouchers Pay¬ 
able Cr. column should agree with the total of all the other columns. Next rule and ink foot 
the register. 

Rule off and foot the sales journal and post the footings (see No. 34). Foot separately the 
regular and special items in the Accounts Receivable and Discount on Sales columns of the 
cash book, and write the totals and titles, as shown in the form on page 274. 

Balance and rule off the cash book, and post the footings. 

No. 136. — Statement, Commercial Bank. Reconcile the bank balance, and list the out¬ 
standing checks on the stub of the check book. 

In business, the canceled checks would of course accompany the statement. 

Call at the teacher’s desk for your paid jackets and canceled checks, if they have not been 
returned to you. 

Post the voucher register in accordance with the following instruction: First, post the 
footings of tfie Vouchers Payable Cr. column to the credit of Vouchers Payable, and place 
a check mark, with the folio of the account over it> opposite the amount. Next post the un¬ 
checked Sundry Debits entries. (The footing of the General column is not posted nor checked.) 
Then post the footings of the remaining columns to the debit of their respective accounts, and 
check the amounts. Analyze the different sections of expense when posting to the expense 
ledger. 

Rule off and post the journal and post the special column items. 

Take a trial balance of your general ledger. 

ADJUSTING ENTRIES 

No. 137. — Prepare adjusting entries as follows: 

(a) Reserves for depreciation. 


1 . 

On Buildings 

2% 

2. 

On Machinery and Equipment 

12*% 

3. 

On Lasts and Patterns 

25% 

4. 

On Office Equipment 

10% 


Charge Manufacturing Expense with depreciation on Buildings, Machinery and Equipment, 
and Lasts and Patterns. Charge General and Administrative Expense with depreciation on 
Office Equipment. 


ADVANCED COURSE 295 

(b) The Tools inventory amounts to $2500. Charge the difference between the 

book value and the inventory to Mfg. Expense. (Credit Tools.) 

(c) Set up a reserve for Loss on Bad Debts for 2% of the outstanding Accounts 

Receivable. 

( d ) Accrued Salaries and Wages as follows: 

Direct Labor $676.50 

Indirect Labor 112.50 Debit Mfg. Expenses 

Shipping Dept. Wages 37.50 Debit Selling Expenses 
Office Salaries 24.00 Debit Gen. and Ad. Expenses 

(e) Royalties Accrued amount to $312.45. 

(/) Calculate the accrued Interest on Notes Payable and Notes Receivable. 

The following inventories have been reported by the different departments, as per schedules 

on file: 


Inventories, December 31, 19— 


Assets 

Materials per schedule # 1 

$3428.60 

Factory Supplies “ 

#3 

410.34 

Fuel “ 

#6 

468.10 

Goods in Process “ 

#2 

6172.15 

Shipping Supplies “ 

#5 

229.85 

Finished Goods “ 

#4 

17600. 

Office Supplies “ 

#7 

40.50 


Close the journal, and post adjustment entries. 

Take an adjusted trial balance. 

Make an abstract of the sales ledger, and see if it agrees with the controlling account. 

Make an abstract of Vouchers Payable Cr. from the voucher register, and compare it with 
the balance of the Vouchers Payable account, and with the unpaid vouchers. 

Make an abstract of the accounts in the expense ledger and see that they agree with the 
controlling accounts in the general ledger. 

The following order should be observed in the operations of closing the books for the year. 

(a) Make and post the adjusting entries in Number 137. 

( b ) Take an adjusted trial balance. 

(c) Prepare a Statement showing cost of goods manufactured and sold. (See model form 
on page 296.) 

( d ) Prepare a Profit and Loss Statement. (See model form on page 297.) 

(e) Prepare a Balance Sheet. (See model form on page 298.) 

(/) Make Closing Entries in your journal to close all manufacturing, and profit and loss 
accounts. (See model form, page 299.) 

(g) Post Closing Entries and rule the ledger accounts. 

(h) Close the Profit and Loss account into Surplus. 

(i) Take a final trial balance. 

Prepare a balance sheet beginning with the most fixed asset (real estate), and ending with 
the quickest or most liquid (cash). Treat the balance of Imprest Fund Account as cash on 


296 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


THE DARLINGTON SHOE COMPANY 


Exhibit B. Schedule I 


Statement showing Cost of Goods Manufactured; year ended Dec. 31, 19 


Raw Materials Used 
Inventory Jan. 1, 19— 

Purchases to Dec. 31, 19— 

Less: 

Return Purchases 
Freight In 
Total Cost 
Less: 

Inventory, Dec. 31, 19— 

Labor 

Manufacturing Expenses: 

Fuel, Light and Power 
Indirect Labor 
Factory Supplies 
Depreciation on 
Buildings 

Machinery and Equipment 
Lasts and Patterns 
Repairs and Renewals 
Royalties 

Insurance on Buildings and Equipment 
Taxes on Buildings and Equipment 
Total Charges to Manufacturing 

Add: 

Goods in Process, Jan. 1, 19— 

Less: 

Goods in Process, Dec. 31, 19— 

Net cost of Goods Manufactured 


$153817.62 

952.35 




$12396 

18 



152865 

27 



371 

84 



$165633 

29 



14580 

10 

$151053 

19 



109345 

25 

$2410 

75 



4580 




9078 

75 



1208 

05 



5103 

50 



7604 

20 



2625 

50 



5647 

27 



1242 




1948 

70 

41448 

72 



$301847 

16 



24686 

31 



$326533 

47 



17661 

45 



$308872 

02 






hand. The amount should agree with the balance of the petty cash book. Arrange the items 
on the credit side in the order of capital stock, current liabilities (you have no fixed liabilities), 
and surplus. 


Closing the Ledger. — You will close the ledger by passing the entries through the journal; 
that is, by making the closing entries in the journal and posting them to the general ledger in the 
regular way (see model closing entries, page 299). First construct a Manufacturing Account 
and a Profit and Loss Account in the general ledger, and by proper closing journal entries close 
the accounts necessary according to the Statement of Cost of Goods Manufactured (see above 
model form), and the Profit and Loss Statement (see model form page 297). 

In closing the ledger the following method should be adopted (see model closing entries, 
page 299). Frame journal entries, closing Returned Purchases and Freight In into Raw 



























ADVANCED COURSE 


297 


THE DARLINGTON SHOE COMPANY 

Exhibit B 


Profit and Loss Statement, year ended Dec. 31, 19 — 




Gross Sales 

$414387 

06 





Less: Returns 

1523 

81 





Net Sales 



$412S63 

25 



Deduct: 







Cost of Manufactured Goods Sold 







On hand, Jan. 1, 19— 

$14631 

50 





Cost of goods manufactured during the year, 







see Schedule 1 

308872 

02 






$323503 

52 





Deduct: On Hand 12/31 

12713 

25 

310790 

27 



Gross Profit on Sales of Manufactured Goods 



$102072 

98 



Deduct: 







Selling Expenses 

$24418 

47 





Gen. Adm. Expenses 

16010 

98 

40429 

45 



Net Operating Profit 



$61643 

53 



Add : Other Income Items 







Interest on Notes Receivable 

$109 

36 





Discount on Purchases 

7310 

53 

7419 

89 



Total Income 



$69063 

42 



Deduct: Other Expense Items 







Interest on Notes Payable 

$175 

62 





Discount on Sales 

8952 

75 





Allowances to Customers 

418 

25 





Loss on Bad Debts 

3750 


13296 

62 



Net Profit 



$55766 

80 









Materials Account. Inventory of January 1, as shown by Goods in Process Account; the 
balance of the Raw Materials Account, Direct Labor, Manufacturing Expenses, and the Inven¬ 
tory of Goods in Process, December 31; are each to be closed into the Manufacturing Account. 
Close the balance of the Manufacturing Account into the Finished Goods Account. The 
balance of the Manufacturing Account should agree with the Net Cost of Goods Manufactured 
(see form, page 296). Close Returned Sale's, and the balance of the Finished Goods Account 
(cost of goods sold) each into the Sales Account; and Gross Profit on Sales of Manufactured 
Goods, shown by sales account, into the Profit and Loss Account. Discount on Purchases, 
Selling Expenses, General Administrative Expenses, Interest, Discount on Sales, Allowances 




























298 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


THE DARLINGTON SHOE COMPANY 
Exhibit A 

Balance Sheet, December 31, 19 — 

Assets 




Real Estate and Equipment: 







Land 

$25000 






Buildings 

100750 






Machinery and Equipment 

51035 






Tools 

5450 






Lasts and Patterns 

33069 






Office Equipment 

3580 


$218884 




Good Will 



25000 




Current Assets: 







Cash 

$26853 

65 





Notes Receivable 

32233 

80 





Accounts Receivable 

63386 

45 





Accrued Interest on Notes Receivable 

84 

70 





Merchandise on hand 







Raw Materials, Goods in Process 

35853 

45 





Finished Goods 

12713 

25 





Factory Supplies 

1242 

50 

172367 

80 



Prepaid Assets: 







Taxes 

$1452 

40 





Insurance 

547 

60 

2000 




j Total Assets 



$418251 

80 


Capital, Liabilities, and Surplus 


Capital Stock: 





Preferred outstanding 

$100000 




Common outstanding 

150000 


$250000 


Fixed Liabilities: 





Mortgage Payable 



25000 


Current Liabilities: 





Notes Payable 

$7500 




Vouchers Payable 

17799 

84 



Accrued Interest on Notes Payable 

150 




Accrued Interest on Mortgage 

900 




Accrued Salaries and Wages 

257 

57 

26607 

41 

Reserves: 





For Depreciation of Buildings and Equipment 

$16534 

50 



For Depreciation on Lasts and Patterns 

22602 




For Depreciation on Office Equipment 

716 




For Loss on Bad Accounts 

5261 

83 

45114 

33 

Surplus: 





Balance, January 1, 19— 

$15763 

26 



Net Profit, January 1-December 31, 19— 

55766 

80 

71530 

06 

Total Capital, Liabilities and Surplus 


- 

$418251 

80 





































ADVANCED COURSE 


299 


MODEL CLOSING ENTRIES 

December SU 19 — 



Returned Purchases 

$952 

35 



Raw Materials 



$952 


Returns and allowances on purchases of raw 





materials 





Raw Materials 

371 

84 



Freight In 



371 


To close cost of freight to Raw Materials 





Manufacturing 

24686 

31 



Goods in Process 



24686 


To close inventory of Jan. 1 into Mfg. account 





Manufacturing 

151053 

19 



Raw Materials 



151053 


Cost of raw materials used in manufacturing 





for the year ending Dec. 31, 19— 





On hand 1/1/19— $ 12396.18 

Net purchases 152865.27 

Freight In 371.84 





165633.29 





On hand 12/31/19— 14580.10 





151053.19 





Manufacturing 

150793 

97 



Labor 



109345: 


Manufacturing Expenses 



41448' 


To close the cost of Labor and Mfg Expenses to 





the Manufacturing account 





Goods in Process 

17661 

45 



Manufacturing 



17661< 


To take out of the Mfg. account the goods in 





process of Dec. 31, 19— 





Finished Goods 

308872 

02 



Manufacturing 



308872( 


To close to Finished Goods the cost of goods 





manufactured for the year (Seo Statement 
of Cost of Goods Manufactured) 





Note. — The remaining closing entries are the same as 
in a mercantile business, following the Profit and Loss 
statement as a source of information for the amounts and 





accounts. 





45 


02 


to Customers, and Loss on Bad Debts, are each to be closed into the Profit and Loss Account. 
The balance of the Profit and Loss Account is to be closed into the Surplus Account. 

Foot and rule off all nominal accounts and all accounts in the sales ledger that balance. 

You will now adjust the inventories and accruals. Frame an entry debiting the proper 
accounts for the inventories of December 31 (see your original entries) and credit Sundry In¬ 
ventory Account. To adjust the accruals after the books are closed it is necessary to reverse 
the entries made to adjust the accruals before the books are closed. 

You have now completed the records and statements of the business for the fiscal period, 
ending December 31, 19—, and the books are in proper shape to receive the records of the 
next fiscal period. As previously explained, a portion of the profits of a corporation is dis¬ 
tributed to the stockholders in the form of dividends, which are declared by the Board of 
Directors at certain periods, as quarterly, semi-annually, and annually. You may assume that 
the Board of Directors of the company have declared an annual dividend of 10% from surplus 























300 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


on the outstanding capital stock, payable on January 25, 19—, to stockholders of record of 
January 15. Frame a journal entry for the dividend declared. 

In practice, the stock books would be closed January 15 to give the secretary an oppor¬ 
tunity to make up a list of persons holding stock on that date. This list would be turned over 
to the treasurer, who would send dividend checks to the stockholders on January 25, at which 
time the Dividend account would be charged with the total amount. 

Take a final Trial Balance. 

EXERCISES 

The following exercises are to be prepared on loose paper: 

1 The petty cash book of the Gile Manufacturing Company shows the following entries 
for December, 19—, dates being omitted: Office postage, $5, $5, $2.25; Supplies for Ship¬ 
ping Dept., $4.50, $4, $2.50, $3.50, $5.75; Express In, $1.15, $.75, $1.40, $3.10, $.45; Ex¬ 
press Out and Charge, $2.15, $1.85, $3.40, $.95; Express Out Expense, $1.45, $.50, $1.35, 
$2.75, $1; Extra window cleaning, office, $1.75; Glazing factory windows, $3.55; Telegrams, 
$.57, $.25, $.42, $1.12, $.62, $.38, $.25; Protest fees, $1.50, $2.25, $1.75, $2.50; Extra carting: 
Inward, $1.50, $1, $1.75, $2.50; Outward, $3, $2.50; $1, $2.25 ; Lettering office window, $1.75 ; 
Shop signs, $3.50; Repairing superintendent’s office chair, $1.25 ; Donations : Factory Christ¬ 
mas entertainments, $5; Tickets, Policemen’s Benevolent Association, $3; Printing, shop 
tags, $4.50; Shipping labels, $3.75; Office envelopes, $2.50; Coin wrappers, $1.25; Pay en¬ 
velopes, $2.25; Great Bear Water, office use, $1.75; Cab hire : Office, $1.50, $1.25, $3; Factory, 
$1.25, $1.50; Repairing rollers: Factory, $1.25; Shipping Room, $2.50. 

Analyze the above entries, and make a summary of the same. 

2 The balance sheet of the Dunning Manufacturing Company, as of June 30, 19—, showed 
the following production inventories: Materials, $21652.24; Goods in Process, $7941.83; 
Finished Goods, factory cost, $34659.65; Factory Supplies, $1512.88. Their trial balance at 
the end of the fiscal year showed: Purchases of Materials, $53439.72; of Factory Supplies, 
$3918.76; Purchases Returned, $324.15; Allowances on Purchases, $117.53; Freight In, 
$612.97 ; Direct Labor, $13287.29; Manufacturing Expenses, $9643.71; Depreciation, $2406.25. 
Their production inventories at the end of the period were : Materials, $19264.36 ; Goods in 
Process, $8476.34; Finished Goods, factory cost, $31214.82; Factory Supplies, $2263.30. 

From the above data prepare the Manufacturing Account section of the Manufacturing, 
Trading, and Profit and Loss Statement. 

3 The balance sheet of the Drake Manufacturing Company for the fiscal period ended 
December 31, 19—, showed the following assets and liabilities, capital stock, and surplus, 
the cents being omitted: Cash, $31420; Investments (marketable), $16340; Notes Receiv¬ 
able, $9320, and Accounts Receivable, $114930, less depreciation on both, $6212; Raw Ma¬ 
terials, $38470; Goods in Process, $13290; Finished Goods, $228336, less depreciation, 
$11416; Buildings, $17360, less depreciation, $868; Land, $8450; Machinery and Equip¬ 
ment, $192470, less depreciation, $15397; Tools (revalued), $4483; Furniture and Fixtures 
(revalued), $8940; Patents, Models, and Patterns, $82480, less depreciation, $16496; Sink¬ 
ing Fund Investment, $22500; Good Will, $50000; Loans Payable, $15000; Notes Pay¬ 
able, $18730; Accounts Payable, $162470; Mortgages Payable, $50000; Preferred Stock, 
$250000; Common Stock, $250000; Sinking Fund, $22500; Surplus, $22400. Deferred 
Assets; Insurance, $5200; Interest Receivable, $550; Advances on Freight Deliveries, $2400; 
Deferred Liability: Interest Payable, $5450. 

Prepare the above balance sheet in proper form, arranging the assets and liabilities in the 
order of fixed and current. 


ADVANCED COURSE 


301 


4 From the following data prepare a balance sheet and a statement of earnings of the 

United Manufacturers Company, December 31, 19—: Assets: Cost of Properties, includ¬ 
ing trade marks, patent rights, real estate, buildings, and machinery and equipment, 
$16359861.95; Net Additions during the year, $1630.30. Investments in Affiliated Com¬ 
panies, $575000. Deferred Charges to Operations: Insurance, Interest, and Other Periodic 
Expenses, prepaid, $124193.30 ; Expenses' of Incorporation, $22298.34, less proportion written 
off, $3344.75. Inventories of Raw and Finished Products and Supplies on Hand, $4077973.79. 
Accounts Receivable, $1892705.86, less reserve for discounts, $50000. Notes Receivable, 
$98281.52. Advances, recoverable and to agents, $30336.49. Cash on Hand, in banks, and 
in transit, $572680.22. Liabilities: Cumulative Preferred Stock, $5000000; Common Stock, 
$15000000. Notes Payable, $2661563; Loans and Deposits to Officers, $222621.14, to others, 
$149555.50; Accounts Payable and Accrued Pay Rolls, $158554.33. Surplus, $-. 

Sales, less returns and allowances, $9127542.87; Producing and Manufacturing Costs, 

$7224680.48; Gross Earnings, $-—. Selling and General Administrative Expenses, 

$1125875.07; Earnings from Operations, $-. Miscellaneous Profits and Interest 

Received, $64259.69 ; Total Net Earnings, $-. Miscellaneous Charges : Interest on 

Loans and Deposits, $106923.96; Special Reserve for Discounts on Customers’ Accounts, 
$50000; Dividends on Preferred Stock, $175000; Net Surplus Earnings, $-. 

Show the entries which would be framed when a semi-annual dividend of 1 \% on the pre¬ 
ferred stock has been declared out of surplus by the above company, and when the dividend 
has been paid by checks. 

5 The annual statement, December 31, 1918, of the Central Leather Company showed 
assets as follows : Fixed Assets : Property Account, including timber lands, railroad and floats 
engaged in the lumber, glue, and other allied industrial operations, $67154412.21; Invest¬ 
ments, $950228.04. Current Assets: Inventories: Leather in Stores, Lumber, and Other 
Finished Products, $17353347.05: Hides and Leather, raw and in process, and Other Ma¬ 
terials, $36588335.62; Accounts Receivable, $8790850; Notes Receivable, $992,080.80; 
Cash in Banks and on Hand, $4325982.98; Deferred Charges to Profit and Loss, $306405.43. 
The capital stock and liabilities were as follows: Preferred Stock, $33299050; Common 
Stock, $39701030.50. Fixed Liabilities: First Mortgage Five Per Cent Bonds, $36764150; 
The United States Leather Company Debentures, $3401000; Real Estate Mortgage, $100000. 
Current Liabilities: Notes Payable, $15955000; Foreign Drafts, $585005.54; Accounts 
Payable, $1149085.25; Accrued Interest on Bonds and Debentures, $493561.87; Dividend on 
Preferred Stock, payable January 1,1919, $582732.50. Reserves: Fire Insurance, $123034.41; 
Miscellaneous, $501785.98. 

Prepare a consolidated balance sheet for the above in proper form, and show the surplus, 
arranging the items in the order given. 

The profits for the year, after deducting all losses and expenses, were $3403680.11, and 
the income from^nvestments was $144210.24. The deductions from revenue were: Interest 
on Bonds and debentures, $2053387.50; dividend on preferred stock, $2330930. The sur¬ 
plus on January 1, 1918, was $4642633.23. 

Prepare a consolidated profit and loss statement, showing the balance to surplus, the sur¬ 
plus for January 1, 1918, and the surplus for December 31, 1918. 

From the balance sheet, prepare a detailed statement of the quick assets and current lia¬ 
bilities, and show the net surplus, stating which it is — quick assets or current liabilities. 

6 In this exercise you will be required to find costs of goods in process and of finished goods, 
and to distribute burden by the direct labor cost method. (See Cost Keeping, and the para¬ 
graphs relating to the same, on pages 274 to 277.) Rule nine money columns, full length, on a 







302 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


sheet of foolscap paper, and head the columns as follows: Materials, Labor, Prime Cost, 
Burden, Factory Cost, Expense, Total Cost, Profit, Selling Price. 

From the data given below find the total cost of materials, the total labor cost, and the 
prime cost of the following goods in process, entering each article separately on the sheet, and 
heading the section, Goods in Process. 

No. 1: M. (materials), $139.50; L. (labor), $56.04. No. 2 : M., $141.62; L., $112.08. 
No. 3: M., $104.18; L., $92.25. No. 4: M., $75.06; L., $13.75. No. 5: M., $92.12; L., 
$6.19. No. 6: M., $112.24; L., $48.72. No. 7: M., $124.85; L., $104.25. No. 8: M., 
$152.10; L., $15.60. No. 9: M., $176.90; L., $140.35. No. 10: M., $210.05; L., $223.96. 

Rule off all columns of this section, and head the next section, Finished Goods. 

Next, on the same sheet, find the prime cost of each of the following articles of finished 
goods, the total cost of materials, the total labor cost, and the total prime cost: No. 1: M., 
$2790.35; L., $3052.08. No. 2: M., $2807.25; L., $3221.52. No. 3: M., $2102.26; L., 
$2603.06. No. 4: M., $1484.14; L., $1842.34. No. 5 : M., $1801.82; L., $2300.32. No. 6 : 
M., $2303.38; L., $2655.09. No. 7: M., $2475.12; L., $3096.36. No. 8: M., $3038.08; L., 
$3782.84. No. 9: M., $3517.54; L., $4254.32. No. 10: M., $4162.46; L., $5038.08. 

Rule off all columns of this section, and head the next section, Summary. 

Find the total costs of materials used in the goods in process, and in the finished goods, 
and the total labor costs, and show the same in the Summary section. Next find what per¬ 
centage the labor cost of goods in process bears to the total labor cost, carrying the quotient to 
three decimal places, and show the same in the explanation column of this section. Then find 
the percentage of labor cost of finished goods in the same way, and show it in this section. 

The overhead charges (Mfg. Exp.) for the period were $10198.15, and the amount charged 
off for depreciation was $4500. Find the total burden, and charge such a part of it to goods 
in process as you found the cost of labor on these goods to be of the total labor cost. Enter 
the amount in the Burden column of the goods in process section. Complete this section by 
finding the factory cost, and extending the amount into the proper column. Foot the columns. 
In the work of the following sections carry fractions to eight decimal places. 

Deduct the amount of the burden on the goods in process from the total burden to find 
the amount to be distributed over the finished goods. Find the ratio of burden by the direct 
labor cost method, and distribute the burden over each of the articles, and place the amounts 
in the proper column. Foot the column. Next find the factory cost of each of the articles, 
and show the amounts in the proper column. Foot the column. 

The selling and the general administrative expenses for the period were $17635.76. The 
profit wanted is 20%. 

Find the percentage of expense as follows: First, add the amount of the fourth element 
of cost to the total factory cost, which will give the fifth element of cost, or total cost; second, 
multiply this amount by 100%, plus the per cent of profit, to find the total selling price ; third, 
divide the amount of the selling and the general administrative expenses by the total factory 
cost, which will give the percentage of expense. Distribute the expense over each of the articles 
and enter the amounts in the proper column! Foot the column. 

Find the total cost of each of the articles, and show the amounts in the proper columns. 
Foot the column. 

Find the profit on each of the articles and the selling prices of the same, and show the amounts 
in the proper columns. Foot the columns. 

Using the model on page 275, prepare from your cost finding sheet, a diagram of cost find¬ 
ing for the finished goods, and show the results in the Summary section of the sheet. Rule off 
the section. 


ADVANCED COURSE 


303 


The following exercises are given for practice in schools which have adding machines: 

7 Prove the postings to your sales ledger by listing first, the charge entries in the original 
books, second, the charge postings in the accounts in the ledger, and compare the totals; third, 
by listing the credit entries in the original books, and fourth, the credit postings in the accounts, 
and compare the totals. Prove the postings in your general ledger in the same way. 

8 Prove your Accounts Payable account by listing first, the original credit balance and 
all your voucher jackets; and second, all paid jackets, and compare the difference in the totals 
with the balance of the account, as shown by your balance sheet. Verify the balance by listing 
the credit, and charge postings, as instructed in No. 7, and find the difference in the totals. 

9 List and add the following items : 1423.64, 377.56, 713.86, 338.67, 674.28, 524.98, 289.24, 
700.77, 580.92, 1342.86, 472.10,1447.07, 750.95, 650.25, 657.39,1028.11, 692.32,1212.89, 469.67, 
1918.70, 236.60,690.04,966.37,1659.38, 103.63, 283.69, 505.53,595.30,1404.20, 3331.44, 2202.20, 
4466.55, 1777.64. 

10 List and add the following deposits and checks, and show the bank balance : Deposits, 

Balance. — 8375.92. 1. —. 1254.06; 2. — 345.04; 3. — 402.53; 5. — 259.46; 6. —577.59; 

7.-359.87; 8.— 104.56; 9.— 240.57; 10.— 1145.22; 12.— 310.30; 13.—240.57; 14 — 
1161.10; 15. —259.40; 16. —1356.52; 17.— 631.30; 19. — 1226.29; 20. —5142.36; 21.— 
703.28; 22.-592.46; 23. — 177.80; 24. —111.19; 26. —392.15; 27.—817.93; 28.— 
412.19; 29.— 1006.04; 30. — 1715.43. Checks: 243.24, 345.67, 1020.50, 65.01, 78.78, 

220.34, 354.00, 41.00, 450.70, 66.00, 8.03, 5.00, 749.26, 1104.05, 143.10, 400, 267.76, 1059.90, 
444.45, 19.10, 26, 4506.25, 700, 540.34, 2106.78, 1725.50, 346, 444.03, 1223.45, 54.35, 245.87, 
1011.36, 104.01, 2775.50, 103.40, 3.13, 181.20, 1623.92, 19.60, 20.10, 53.80, 203, 1781.25, 120.19, 
65.22, 13.37, 1210.32. 


QUESTIONS 


1 Define manufacturing, raw materials, and finished goods. 

2 Explain what is meant by “industrial production,” and state how it has been affected by the 
substitution of mechanical for human forces. 

3 How do manufacturers dispose of their products ? 

4 What is meant by the “factory system”? 

5 What is the purpose of organization, and how does it affect manufacturing ? 

6 Explain efficiency, as applied to manufacturing. 

7 What do the activities of a manufacturer comprise? What is “stock keeping”? “Cost keep¬ 
ing”? 

8 To what do the records of a manufacturing business relate? Explain how these records are kept 

with reference to what they show. . . 

0 What is the distinctive account in a manufacturing business, and what does it show ? How is it 


represented ? 

10 What other accounts are peculiar to a manufacturing business ? 

11 How may expenses be classified, and what are the advantages of such a classification? 

12 Explain the analysis book, and state what you think is its use. 

13 What is the purpose of a “purchase requisition,” or of a “ stock report” ? Explain what is meant 
by a “purchase order,” and state how it is usually made out, and what is done with it. 

14 How are invoices and expense bills usually treated in a manufacturing business? What are 
necessary to make this system of records complete? 

15 What is a voucher jacket? Explain its form and use. 

16 Describe briefly the voucher register, and state how it should be proved before posting. 

17 Explain the advantages of the form of cash book you used in the Shoe Manufacturing Business. 

18 What is an “imprest fund,” and how is it treated? 

19 What is a “petty cash book,” and to what book or books is it subsidiary? What is done with the 

entries in this book? . 

20 Explain the use of the stock ledger, and state what is meant by a perpetual inventory. 


304 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


21 Explain the two general methods of production in manufacturing, and state some of the corn* 
modities to which each method can be applied. 

22 Explain what is meant by cost keeping, as applied to manufacturing and its principal objects. 

23 What are the elements of cost? Using your own figures, draw a diagram of cost finding, and 
show the percentages. 

24 What is a “production order” ? A “material requisition” ? A “labor ticket”? A “pay roll’’ ? 

25 How is cost divided, and how are the prime cost amounts found ? 

26 What is a “cost record”? A “cost ledger”? 

27 Name six wage systems, and explain the two which are most generally used. 

28 What is “burden,” and what does it include? What other names are given to it? 

29 When and how is the cost of burden found ? 

30 Name five methods of distributing burden commonly used in connection with cost systems. 
Explain two of these methods. 

31 What is a “production report,” and what record is made when one is received? 

32 What account in a manufacturing business corresponds to the Purchaser’s account in a mercantile 
business ? 

33 What is meant by “goods in process,” and how is their inventory value found? 

34 Name the departments into which a modern shoe factory is usually organized, and the work 
done in each department. 

35 What materials are used in the manufacture of shoes ? 

36 What are “lasts” and “patterns,” and what purposes do they serve? 

37 How were shoes formerly produced ? How are they produced now ? 

38 Explain the production order used in shoe manufacturing, and give some of the details of its us©. 

39 Name three processes of sewing the uppers to the soles or shoes, and explain each process. 

40 What is an Accrual account ? When constructed, for what is it debited ? For what credited ? 
What entries are made in this account when the accruals are adjusted? 

41 When and how are the accrual and inventory entries adjusted? 

42 Explain in detail the Manufacturing account section of the Manufacturing, Trading, and Profit 
and Loss Statement, and state what the balance shows, and what item is brought down into the Trading 
account section. 

43 How is the gross profit on trading found in the manufacturing business ? How the net profit ? 
To what account is the net profit or net loss of a manufacturing corporation carried ? 

44 Describe the usual form and arrangement of the balance sheet of a business corporation. 

45 Explain in detail how you closed the accounts in the Manufacturing account section of your 
statement; in the Trading account section; and in the Profit and Loss section. 

46 What entry should be framed, when a dividend has been declared ? When it is paid in cash ? 


ANALYSIS OF FINANCIAL REPORTS AND STATEMENTS 


The attention of the student has been repeatedly called to the importance of financial 
reports and statements, and to the necessity for care and originality in their preparation. The 
reason for this, which by now should be thoroughly appreciated by the student, is that the 
business man or the official of a company looks upon bookkeeping as a means to an end. He is 
much more concerned with the figures and reports drawn from the books at certain intervals 
than he is with the books themselves. He may know nothing of the technicalities of book¬ 
keeping, but he expects a financial statement to be submitted to him which informs him about 
all the details of his business in a simple, direct, and easily understood manner. 

In this work so far, the proper construction of these statements and reports has been given 
chief attention. Model forms of statements, which meet the conditions illustrated in the 
different practice sets, have been given for study and as an aid to the student in preparing 
such statements. The structure of the statements has been emphasized, and it has been as¬ 
sumed that the student has set for himself a high standard for finished work with proper atten¬ 
tion given to all details. 

Of even greater importance than the artistic construction of financial reports, however, is 
the ability to analyze and interpret them and to draw sound and intelligent conclusions there¬ 
from. In other words, such statements are of value only as one has the ability to read them 
understandingly. One should train himself to make comparisons, to draw conclusions, to 
interpret the figures so as to obtain therefrom an accurate account of the finances of the busi¬ 
ness. 

While the ability to do this is to a great extent the result of business experience, sound 
reasoning faculties, good judgment, and natural power of analysis, yet there are certain funda¬ 
mental principles that will assist one to read and analyze a financial statement intelligently. 
There are certain things which one should naturally look for, depending upon the point of view 
of the reader, and to this end, a few suggestions are offered to aid in the interpretation of re* 
ports, whether it be from the standpoint of the merchant, the banker, the credit man, or the 
investor. 

The analysis of the Profit and Loss Statement will first be considered, after which atten¬ 
tion will be given to the Balance Sheet. 


305 


306 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


ANALYSIS OF PROFIT AND LOSS STATEMENT 

1 Comparison of sales, profits, and operating expenses with preceding period or periods. 

This clearly indicates the growth and expansion of the business, or the opposite; it shows the 
ratio of increase in expenses to the increase in sales; and it also shows whether the expenses 
of a certain department have increased without a corresponding increase in results. Many 
other interesting comparisons may be made which should indicate the progress of the business. 
The practical value of such comparisons has given rise to a common use of the Comparative 
Profit and Loss Statement with figures for the current and preceding periods shown in parallel 
columns. 

2 The calculation of percentages of profit and expenses results in a more graphic survey 
of the business of the period than is possible when the figures merely state amounts in dollars 
:and cents. 

Percentages may be calculated showing such results as the following: 

(а) Per cent of gross profit on the cost of sales. 

(б) Per cent of gross profit on the sales. 

(c) Per cent of gross profit consumed by each class of operating expense. 

( d ) Per cent of net profit on volume of sales. 

(e) Per cent of net profit on capital investment. 

(f) Per cent of bad debts. 

3 Turnover of Stock. — A merchant is always much interested in the “ turnover ” of 

stock. As the term is commonly used, the “ turnover ” for a period represents the cost of goods 

sold. From the cost of the sales we determine the number of times the merchant has turned 
his stock by the following method. 

Divide the cost of goods sold by the average cost value of the stock carried; if the 
inventory figures are available for the beginning and the close of the period, and perhaps at 
semi-annual or quarterly intervals, such inventories are averaged to arrive at the amount of 
stock generally carried. 


ANALYSIS OF THE BALANCE SHEET 

Among the things involved in an analysis of the balance sheet, to which the attention of 
the reader or investigator may be directed, the following may be mentioned. 

1 Ratio of Current Assets to Current Liabilities. — This is the first thing ordinarily looked 
for in an investigation of the balance sheet. As to what this relation should be depends upon 
the nature of the business, type of management, personnel of owners or officers, and other cir¬ 
cumstances. 

It is a tradition among bankers to require as a minimum two dollars of current assets for 
one dollar of current liabilities. In many cases, however, five to one would not be too large 
a ratio. 

The excess of current assets over current liabilities is generally spoken of as the working 
capital of the business. 


ADVANCED COURSE 


307 


2 Relation between Invested Capital and Total Cost of Property and Equipment. — It is 

important to know whether the capital contributed has been used to buy machinery, equip¬ 
ment, land and buildings, looking toward a permanent and established business, or whether 
it has been spent in development, advertising, etc. In many balance sheets it will be observed 
that the greater part of invested capital has been used to acquire property and equipment. 
Here again, circumstances alter cases. 

3 Book Value and Market Value of Stock. — If a corporation, the book value of the 
stock as compared with its market value should be determined. Book value of the stock 
per share is determined by dividing the total net worth or capital by the number of shares. 

4 Earnings per Share. — If a corporation, the earnings per share for the current and pre¬ 
ceding periods should be determined. 

5 Reserve Accounts. — The question as to whether proper provision is being made for 
depreciation of fixed assets is important. This would be shown ordinarily by the existence of 
reserve accounts set up in the balance sheet against the several fixed assets. Proper provision 
will also have been made in a conservatively managed business for losses from bad debts. 

6 Relation between Good Will and Capitalization. — The amount of Good Will shown on 
the books will indicate the policy of the business with regard to its capitalization. In a corpora¬ 
tion, if both preferred and common stock are issued, it will often be found that the preferred 
stock has been issued against the net tangible property of the business, while the common stock 
issue is capitalized good will. 

7 Relation between Accounts Receivable and Sales. — Examination of the balance sheet 
and profit and loss statement should be made to see that the accounts receivable are not 
too large in proportion to the sales. If goods are sold, for example, subject to a cash discount 
in thirty days, the accounts receivable on any date should not be greatly in excess of average 
monthly sales. Otherwise the customers are slow in making payments, indicating that there 
will be losses sustained in collections, or the credit department may not be following up credits 
as closely as should be done. 

8 Contingent Liabilities. — Inquiries should be made to determine whether there are 
“ contingent liabilities ” against the business. It may be stated by way of explanation that 
a contingent liability is one which may arise as a result of the failure of some one else to perform 
his contract, or from any other cause which places an unexpected obligation upon the business. 
Notes receivable under discount, accommodation indorsements, guarantees and warranties, 
etc., are examples of contingent liabilities. 


PROBLEMS IN ANALYSIS OF FINANCIAL STATEMENTS 


1 The trading activities for the year ending December 31 are as follows: 


Inventory, January 1 
Inventory, December 31 
Net sales 
Selling expenses 

General administrative expenses 
Invested capital 


$204727 

277847 

801344 

31835 

34712 

512000 


308 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


Calculate the following: 

(а) Rate of gross profit on Cost of Sales 

(б) Rate of gross profit on Sales 

(c) Per cent of gross profit consumed by 

(1) Selling expenses 

(2) General administrative expenses 

(d) Per cent of gross profit remaining 

(e) Rate of net profit on capital 


2 Calculate how many times the stock has been turned during the year in the following 
problem: 


Cost of goods sold $631712 

Inventory, January 1, 214217 

Inventory, December 31, 268682 

3 The following is a comparative balance sheet at December 31, 1910, and at December 
31, 1911, presented to the board of directors of the Western Company at its meeting 
January 5, 1912. 


Assets 

Dec. 31 

1910 

Dec. 31 
1911 

Land 

$20000 

$25000 

Buildings 

45000 

45000 

Machinery and tools 

86000 

89000 

Horses, wagons and harness 

10500 

10500 

Patents 

6000 

6000 

Good will 

25000 

25000 

Cash 

28300 

10300 

Accounts receivable 

29600 

26550 

Investments and bonds 


15000 

Inventory — Goods in process 

10800 

14690 

Inventory — Material and supplies 

6750 

10300 

Agency investments 


3680 


$267950 

$281020 


Liabilities 

Bonds and mortgage payable 


$20000 

Notes payable 

$35000 

2000 

Accounts payable 

16400 

19350 

Reserves for depreciation 

2500 

6750 

Discount on bonds 


1000 

Capital stock 

Preferred 

150000 

150000 

Common 

50000 

50000 

Surplus 

14050 

31920 


$267950 

$281020 






ADVANCED COURSE 


309 


The land increase was due to appraisal based on rise in values of factory sites in the imme¬ 
diate vicinity. 

Together with the balance sheet (page 308) there was submitted to the board a statement 
of income and profit and loss showing the profits of the year to have been $22120. 

The directors state to the auditor that in view of the decrease of cash and accounts receiv¬ 
able, of the absence of dividends, and of the increase of capital liabilities, they are unable to 
ascertain what has become of the profits of the year. 

Prepare a statement to show clearly how the Western Company has applied such resources 
of the year 1910 as have been lost in 1911, and the resources and profits of the year 1911. 

4 On a sheet of analysis paper the assets and liabilities would be set up as they appear 
in the problem in parallel columns; the two columns to the right should be headed respectively 
“ Increase ” and “ Decrease ” and the increase or decrease in each asset and liability shown. 

The results shown by such an analysis are as follows: 

Net Increase in Assets $13070 

Add 

Net Decrease in Liabilities 4800 

Net Increase in Surplus $17870 


Of the net profit as stated to the directors, however, $5000 was due to an increase in the 
book value of the land. 


Deduct from 

Net Increase in Surplus 5000 

$12870 

5 The balance sheets of the Greenleaf Manufacturing Company, at December 31, 1913, 
and December 31, 1914, may be summarized as follows: 


Good will 

Land and buildings 

Machinery 

Tools 

Unexpired insurance 
Inventories 
Accounts receivable 
Cash 

Investment in stocks and bonds 


Capital stock 
Bonds 

Bank and other loans 
Accounts payable 
Accrued interest 
Accrued taxes 
Surplus 


Dec. 31 

Dec. 31 

1913 

1914 

$200000 

$230000 

450000 

750000 

200000 

400000 

40000 

80000 

3000 

4000 

400000 

375000 

175000 

250000 

25000 

95000 

20000 

$1588000 

$2109000 


$800000 

$1100000 

350000 

500000 

70000 

80000 

145000 

125000 

7000 

11000 

4000 

6000 

212000 

287000 

$1588000 

$2109000 








310 


NEW MODERN ILLUSTRATIVE BOOKKEEPING 


During the year a dividend of 4% was declared and paid on the stock outstanding at the 
beginning of the year. $7000 was provided for the depreciation of the buildings, $16000 for 
machinery, and $4000 for tools. The bonds were sold for par, and the stock was sold at 90 
and the difference was charged to good will account. 

In the light of the above facts interpret the changes that have taken place in the financial 
position of the company between the two dates and, so far as possible, indicate how they were 
effected. 


APPENDIX I 

AUDITING 

Auditing is the examining of the entries in books of accounts, and of the subsidiary and 
supporting records. Such an examination is called an “ audit,” and a person who makes it 
is called an “ auditor.” 

The practice of auditing is an established profession. The professional auditor is usually an expert 
accountant, and many auditors are also certified public accountants, who practice under the authority of a 
certificate granted them by a State Board of Accountancy, or other similar body, and which entitles such 
accountants to use the abbreviation C. P. A. after their names. 

Object of an Audit. — The principal object of an audit is the detection of errors and 
fraud in the records; that is, to determine whether or not the records are correct and com¬ 
plete, and the bookkeeping work has been honestly and efficiently done. 

Term of Audit. — The space of time covered by an audit is called the “ term of audit ”; 
and this may be any time agreed upon between the auditor and his client; as, six months, 
one year, five years, etc. The first date of the term of audit is called the “ initial date,” and 
the last date, the “ terminating date.” 

Kinds of Audits. — Audits are divided, with reference to time when made, into First 
Audit; Continuous Audit, usually once a month; Periodic Audit, usually once a year; Special 
Audit, also called an “ Inspection,” made on behalf of an intending purchaser, a creditor, a 
retiring partner, or on account of suspected fraud; Final Audit, for the adjustment of a part¬ 
nership, or on the discontinuance of a business. 

Audits are divided, with reference to different classes of business or activities, into Com¬ 
mercial Audits, which include trading, manufacturing, and mining concerns; Financial Audits, 
which include banks, insurance companies, public service corporations, building and loan 
associations, societies, clubs, etc.; and Municipal or Public Audits, which include the accounts 
of towns, cities, counties, states, and governments. 

Only commercial audits, as they relate to trading and manufacturing concerns, will be treated in this 
book. For further information on auditing, the student is referred to the special books on the subject. 

Duties of an Auditor. — An auditor should critically examine, or satisfy himself as to 
the accuracy of, all entries in the books of account made during the period under audit, inspect 
all available vouchers, and compare them with the records; verify all assets and liabilities as 
of the terminating date; make a report of his audit; and certify to the accuracy of the bal¬ 
ance sheet. 

Auditor's Working Papers. — The papers which an auditor uses in making an audit are 
called “ working papers.” These include trial balances, abstracts, balance sheets, analysis 
sheets, etc. In addition to these working papers, auditors use a notebook in which they make 
records of such matters as will assist them in making their report. 

Kinds of Errors. — In examining entries in books of accounts, there are three kinds of 
errors, the presence of which the auditor should detect, or the absence of which he should 
prove These are intentional errors , technical errors , and errors of principle . 

3U 


312 


APPENDIX I 


Intentional errors are errors made for the purpose of perpetrating or concealing fraud. 
Technical errors are errors which are made through carelessness, such as posting to the wrong 
account, mistakes in footing, or carrying footings forward, etc. Errors of principle are of 
two kinds, viz., those of omission and those of commission. Errors of omission are: failure 
to provide proper reserves for depreciation of property subject to deterioration, or for shrink¬ 
age of values; failure to include in the assets and liabilities amounts accrued but not due, 
such as interest, insurance, taxes, etc., and prepaid charges. Errors of commission include 
mistakes made in framing original entries, such as charging or crediting items to capital accounts 
which should be placed to revenue or expense accounts, or vice versa. 

Method of Audit. — The general principles of auditing apply to all kinds of audits, but 
the particular method of making an audit will depend somewhat upon the kind of audit to 
be made, the class to which the business to be audited belongs, and to the way the books and 
accounts are kept. 

Some auditors check all postings in the ledgers, and verify all extensions and footings in the books of 
original entry. Other auditors use the analysis method of auditing, by which all general ledger accounts 
are analyzed on analysis sheets. This method is preferable for certain classes of audits. 

Preparation for Audit. — Before beginning an audit the auditor should require that all 
postings be completed, all footings be inked in, all balances be struck, and a trial balance of 
the general ledger and abstracts of the subsidiary ledgers be taken, as of the terminating date. 
The trial balance and abstracts of the initial date should also be in the hands of the auditor. 

Vouchers for all payments, and all other available vouchers, should be arranged in proper 
order. 

When possible the cash on hand at the close of the terminating date, excepting petty cash, should be 
deposited in bank on the succeeding day, and the bank balance should be reconciled as of the terminating 
date. 

Schedules of the inventories of the stock and other property on hand, duly certified, should 
be ready, as well as a list of notes receivable and payable, and of securities. A list of all over¬ 
due accounts should also be prepared. 

A trading, profit and loss statement, if a trading concern, and a manufacturing, trading, 
and profit and loss statement, if a manufacturing concern, and a balance sheet, should be pre¬ 
pared. 

And, finally, a complete list of all books, with the names of the clerks in charge of them, 
should be compiled. 

Order of Procedure. — The first step to take in making a commercial audit is to prove the 
cash balance of the terminating date. 

Prove Cash Balance. — As a preliminary to this step the bank book should be left at 
the bank to be written up, with a request that this be done as soon as possible. If the audit 
is begun on the following day, and all cash on hand, excepting petty cash, has been deposited, 
the check book and petty cash book (excepting when an Imprest Fund account is kept) will 
show the general cash balance to be proved. If the cash has not been deposited, the currency 
of the terminating date should be counted and listed, together with any items that may be 
carried as currency. Next, the checks on hand should be listed, after having been compared 
with the entries in the cash book, which entries should, of course, be within the term of audit. 
The amount of these two lists should be added to the balance in the bank in the check book. 


AUDITING 


313 


If the audit is begun some time after the terminating date, and the cash was not balanced on that date, 
the cash should be balanced and proved on the beginning day. To this amount all payments since the 
terminating date should be added, and all receipts deducted to find the terminating balance. 

After the cash balance and footing of the general cash book have been proved and checked, 
the petty cash balance should be proved and the currency listed, if no Imprest Fund account 
is kept, and the footings of the petty cash book proved and checked. A summary of the cash 
lists is sometimes made to be incorporated in the report. 

Reconcile Bank Balance. —The bank balance should be reconciled as soon as the bank 
book is returned by the bank, and all deposit entries verified. The vouchers should be inspected, 
both as to amounts and indorsements, and any discrepancies noted. The existence of the 
checks which appear to be outstanding should be proven, by communicating with the payees, 
unless proper vouchers are on file. 

Send Statements to Debtors. — Detailed statements of the open accounts in the sales 
ledger, showing the balances on the initial date, and the charges and credits from that date 
to the terminating date, with proper explanation of each item, should be sent in self-addressed 
and stamped envelopes to the debtors, with request to examine the statements and return 
them promptly to the auditor, with their approval or disapproval, and nature of the same 
noted thereon. When these statements are returned, they are compared with the accounts, 
and such accounts as are found to be in agreement are marked Correct. Note should be taken 
of any errors or omissions, and these should be investigated. 

Request Statements from Creditors. — Requests should be sent to creditors with whom 
there are open accounts for complete statements of the client’s account covering the term of 
audit, accompanied by self-addressed and stamped envelopes. 

When these statements are returned, they are compared with the accounts, and such 
accounts as are found to be in agreement are marked Correct. Note should be taken of any 
errors or omissions, and these should be investigated. 

While the statements are being returned and received, the auditor will be proceeding 
with the auditing of the other accounts. 

Audit Notes Receivable. — The notes receivable on hand should be carefully examined 
to see that none are fictitious; and if the auditor has any doubts as to the validity of a note, 
he should communicate with the apparent maker, and obtain from him a verification of its 
genuineness or falsity. Notes that have been left at the bank for collection should be veri¬ 
fied by obtaining a certified list from the bank. The notes and the list should be compared 
with the schedule and checked, but not stamped, and the footing of the schedule should be 
checked with the balance of the Notes Receivable account. Notice should be taken of any 
past due notes which are unsecured, and these should be charged back to the accounts of the 
makers through adjustment entries in the journal at the conclusion of the audit. 

Some auditors when so authorized frame and post adjustment entries to correct errors or omissions, 
as these are detected in the progress of the audit, while others defer this work until the concluding stage 
of the audit. 

Customers’ notes which have been discounted and not paid are a contingent liability. 
A list of these should be made, and note should be taken whether or not a reserve has been pro¬ 
vided for contingent liabilities. 

If any securities, such as stocks, bonds, etc., appear in the assets, these should be care¬ 
fully inspected, and compared with the schedule, the footing of which should be verified, ana 
checked with the account or accounts in the ledger. 

This concludes the preliminary steps usually taken in making an audit. 


314 


APPENDIX I 


Audit General Cash Book. — The general cash book should now be audited, and as in¬ 
tentional errors are more frequently made in this book than in any other, the auditor should 
be constantly on the lookout for evidences of fraud while auditing the cash book. As a special 
precaution against overlooking false cash entries in the accounts, the cash items in the ledger 
should be checked into the cash book, which is the reverse of the usual checking procedure. 
Note should be taken of items which do not check, either in the ledger or the cash book, and 
proper investigation made. 

Debit Side. — The debit side of the cash book should be audited first. The balance of 
the initial period should be compared with the cash balance as shown by the initial trial bal¬ 
ance, and checked, if found to agree. The cash items on the credit side of the general ledger, 
including the controlling accounts, should next be checked individually into the cash book, 
and if there are any available vouchers for the entries, they should be examined and the entries 
compared with them, after which each voucher should be stamped Audited , to prevent it being 
used again for this purpose. 

When the analysis method is used, the accounts in the general ledger would be analyzed on analysis 
sheets before the auditing of the cash book is begun, and the cash totals would be checked into the cash 
book. 

Auditors usually stamp audited vouchers, excepting securities, notes payable, deeds, etc., with a 
rubber stamp, which contains the word Audited, and the name or initials of the auditor. 

The entries for the items in the Accounts Receivable column of the cash book will re¬ 
main unchecked, but the total receipts from customers during the term of audit have been 
checked through the controlling account, which may be accepted at this time as proof of the 
accuracy of the items. If any errors exist in these items, they will be found when the state¬ 
ments sent to customers are returned. 

When other special columns are used, such as Mdse. Disct. and Sales, the items in these 
columns will of course also remain unchecked, but the monthly totals will be checked through 
the accounts in the general ledger. 

The footings of all of the columns on the receipts side of the cash book should be verified 
for the entire term of audit. 

Credit Side. — After all the general column entries and the footings of the special columns 
of the debit side of the general cash book have been checked, the credit side of that book should 
next be audited by checking the debit cash entries in the general ledger, including the con¬ 
trolling accounts, into the general cash book. There should be a voucher in some form, as a 
returned check, a receipt, or a canceled note, for every entry on this side of the cash book, 
excepting for the entries representing outstanding checks; and even for some of these there 
may be receipts or acknowledgments. All returned checks should be compared with the entries 
to see if they agree, both in respect to name of payee and amount, and the indorsements should 
be inspected, after which the checks should be stamped Audited. The outstanding checks 
should be checked from the reconciliation of bank balance against the entries representing them 
in the cash book, and the entries proved, when possible, by receipted invoices or other vouchers. 
The receipts for currency disbursements should be inspected, compared with the entries, and 
stamped. The collection and exchange items in the cash book, or on the collection and exchange 
slips, should be verified through the check book and bank book, and the totals through the 
general ledger. When slips are used they should be stamped. 

The totals of the Accounts Payable column in the cash book are checked through the 
entries in the ledger, and the entries representing these totals are checked through the pur¬ 
chase ledger, or the voucher register, when the Voucher System of accounting is used. 


AUDITING 


315 


Audit Petty Cash Book. — The petty cash book should next be audited, and the support¬ 
ing vouchers inspected and stamped. 

Inspect and Stamp. — After both sides of the cash books have been audited, these books 
and the general ledger and the purchases ledger, or voucher register, should be inspected for 
unchecked cash entries. If any exist, they should be noted and investigated. When the cash 
books have been audited, the auditor should stamp or initial each page to show that fact, 
and this should be done with every book audited. 

Verify Abstract of Purchases Ledger. — Verify the balances as shown on the abstract of 
purchases ledger with the accounts in that ledger, or in the voucher register, checking each 
account found to agree, and then check the footing of the abstract with the balance of the con¬ 
trolling account. 

Audit Purchases Journal. — In auditing the purchases journal, or invoice book (when the 
latter is still used as a book of original entry), or voucher register — the footings for the entire 
term of audit should be verified, and the totals for each month checked with the controlling 
account. The credit entries in the purchases ledger accounts should be supported by invoices, 
properly certified, and the debit entries by returned checks, by return book and allowances 
book, or journal, entries. And the original debit entries should be supported by proper vouchers, 
which should be examined. 

The monthly statements from creditors will serve to verify the accuracy of the accounts in the pur¬ 
chases ledger, or of the entries in the voucher register. A more satisfactory method would be to check all 
entries for purchases, direct from the original invoices, and all credits from the books of original entries. 
All vouchers should of course be stamped at the time they are compared with the entries. 

Audit Voucher Register. — The entries in the voucher register are supported by voucher 
jackets and voucher checks, and these should be compared and checked, and the vouchers 
stamped. The footings of the columns of the register should be verified and checked against 
the accounts in the general ledger. The items in the Miscellaneous columns should be analyzed 
and checked against the entries in the analysis book. The footings of the analysis book should 
be verified and checked against the footings of the proper columns in the register. 

Verify Abstract Sales Ledger. — The next step to take is to verify the abstract of the 
sales ledger, by comparing the balances, as shown thereon, with the accounts in the sales ledger, 
checking each account found to agree, and then compare the footing of the abstract with the 
balance of the controlling account, checking the two amounts if they agree, and noting any 
changes if they do not agree. 

Audit Sales Books. — Whether sales books or sales journals are kept, the footings for 
the term of audit should be verified, and the monthly totals compared with the entries in the 
controlling account. It is not usually practicable or desirable to verify the extensions or foot¬ 
ings of the individual charges in the sales book, as it may be assumed that these were verified 
before the bills were sent out. Neither is it usually practicable to check the individual charges 
to the personal accounts in the sales ledger. The balances of these accounts should be checked 
from the statements sent to customers, when they are returned. If any are not returned, the 
accounts which they represent should of course be checked, but every effort should be made to 
have the statements returned. 

Audit Return Books. — All entries in the return books, both purchase and sales, should 
be examined with the vouchers or supporting records, and checked against the entries in the 


316 


APPENDIX I 


subsidiary ledgers. The footings should be verified and checked with the entries in the con¬ 
trolling accounts. 

Audit Journal. — Special care should be taken in auditing the journal, as it is to this book 
that resort is often made to falsify the records. As now generally used, the journal contains 
comparatively few entries, and these should be authenticated and checked against the entries 
in the accounts in the ledgers. Any errors or doubtful entries should be noted and investigated. 
The footings for the term of audit should be verified, and the footings of the special columns 
checked against the entries in the general ledger. 

Verify Schedules. — The schedules of assets and liabilities not already verified should now 
be examined. The auditor should see that the inventories of merchandise and other property 
have been properly O.K.’d and certified as to the fact that the property represented by the 
schedules has been purchased and is now on hand. Also that the merchandise stock was in¬ 
ventoried at prices not exceeding the original cost or current market value, whichever is the 
lower. The auditor should satisfy himself as to the correctness of the extensions and footings 
of the merchandise inventory schedules. This he may do by making random tests on the 
schedules: that is, by verifying the extensions and footings here and there. If correct, the 
total footing of the merchandise inventory schedules should be checked with the corresponding 
amount on the profit and loss statement, and on the balance sheet. 

The accuracy of the other property schedules should be verified and checKed, care being 
taken to see that proper allowances were made for depreciation. Any errors or omissions found 
in the schedules should be noted for adjustment. All accrued, but not due, assets and liabilities, 
and all prepaid charges (deferred charges) should be determined, and if any were omitted from 
the records, they should be listed and noted for adjustment. 

Conclusion of Audit. — After all of the books and supporting reoords have been audited, 
as heretofore explained, the books of original entry should be inspected to see if all entries re¬ 
quiring to be checked, and all footings, are checked. Note any errors not previously noted, 
and investigate the same. The accounts in the sales ledger should be examined to see if these 
have all been marked “ correct,” to show agreement with the statements sent to customers, and 
to note any differences. The purchases ledger, or the Vouchers Payable entries in the voucher 
register, should be examined in the same way, and any errors noted. 

The accounts in the general ledger should be inspected, and refooted for the term of audit, 
and any errors noted. Verify the trial balance by checking each amount against the correspond¬ 
ing account in the ledger. 

For the purpose of rating the accounts in the sales ledger into the three classes, “good,” 
“ doubtful,” and “ bad,” the auditor may obtain assistance from the credit man, or some mem¬ 
ber of the firm, or officer of the corporation; but he should use his own judgment in making 
the ratings. 

Adjustment Entries. — If errors were detected during the progress of the audit, these should 
now be adjusted to bring the books into agreement with the facts, as shown by the auditor’s 
balance sheet. This is done by framing proper entries in the journal and posting them to their 
respective accounts. The data for these adjustment entries will be found in the auditor’s note¬ 
book and on his working papers. 

Preliminary Trial Balance. — A preliminary trial balance should now be taken of the 
general ledger, as of the terminating date, including adjustment entries; also, abstracts of the 
purchases and sales ledgers, and these should be compared with the controlling accounts. 


AUDITING 


317 


Profit and Loss Statement. — A trading, profit and loss statement, if a trading concern, 
and a manufacturing, trading, and profit and loss statement, if a manufacturing concern, should 
now be made out, and this should show the trading activities, or manufacturing and trading 
activities, the revenues and expenses, the true net profit or net loss, and the disposition of the 
profit, or the adjustment of the loss. Proper schedules to support the statement should also be 
made. 

Balance Sheet. — The balance sheet should show in condensed form the actual assets, 
liabilities, and present worth, or capital and surplus, or deficit, of the concern on the termi¬ 
nating date, and should be supported by proper schedules. 

If an individual or partnership concern, the assets and liabilities are usually arranged on 
the balance sheet in the order of current and fixed, and the proprietor’s or partnership items are 
placed after the liabilities. If a corporation, the assets and liabilities are stated in the order 
of fixed and current, and the capital stock is placed before, and the surplus after, the liabilities. 
If there is a deficit, it is shown after the assets. 

Auditor’s Report. — After the audit has been concluded, the statement, schedules, and 
balance sheet have been made out, and the books are in agreement with the same, the auditor 
should make a statement to his client of conditions as he found them. This is called the “ audi¬ 
tor’s report.” 

The auditor’s report usually contains a balance sheet, styled “ Exhibit A,” and support¬ 
ing schedules, which are styled, “ Exhibit A — Schedule 1,” “ Schedule 2,” etc.; a Profit and 
Loss statement, Exhibit B, and schedules; and a copy of the adjustment entries, Exhibit C. 
If the report is unqualified, the balance sheet is certified by the auditor. 

The following is the usual form of auditor’s certificate attached to the balance sheet: 

We have examined the books of the Wilson Leather Company for the year ending Dec. 31, 
1910, and we certify that in our opinion the above Balance Sheet sets forth the true financial 
position of the company on that date, and that the relative Profit and Loss account is correct. 

54 William St., New York, Price, Waterhouse & Co. 

Feb. 21, 1911. Chartered Accountants. 

If the report is qualified, the balance sheet is certified subject to the qualifications set forth 
in a separate statement, Exhibit D, and “ This exhibit is subject to the qualifications set forth 
in Exhibit D ” is written at the bottom of the balance sheet. Exhibit D contains comments 
on the examination, and states the reasons why the auditor qualifies his certification as to the 
correctness of the assets and liabilities shown in his report. It also frequently contains sug¬ 
gestions for the improvement of the system of accounting in use by the client. 

EXERCISES 

The following exercises are intended to give the student such practice in auditing as will 
enable him to thoroughly comprehend the principles of the subject, and to become familiar 
with the usual procedure in making a commercial audit. While the schoolroom has its limita¬ 
tions in matters of this kind, as compared to the business office, the books of student book¬ 
keepers provide good “ cases ” for the student auditor, and he should perform the work with the 
same care he would use if in actual practice. 

For all working papers, notebooks, and reports, loose paper may be used. If no rubber 
stamp is available, the student will write Audited and his initials where the stamp would be used. 


318 


APPENDIX I 


1 Audit the books of Taylor, Wood & Co. for August or for September (whichever your 
teacher may direct), which will represent a fiscal period. 

Apply to your teacher for the books and supporting records of some other student, and 
having obtained them, read again “ Preparation for Audit,” page 312. Next proceed with 
the auditing in general accordance with the instructions given in “ Order of Procedure,” page 312, 
and following paragraphs. You will not be required to send statements to debtors, or requests 
for statements from creditors. Only such vouchers as would be on hand in actual business 
should be used in making your audit. Separate the others from these. 

You are at liberty to use either the straight checking method or the analysis method of 
auditing in performing this work. If you decide to use the analysis method, prepare an analysis 
sheet as one of your working papers, and analyze the accounts in the general ledger. Verify 
the original entries by the vouchers, and check the totals of the columns of the books with the 
totals of the corresponding columns on your analysis sheets. 

Make careful notes in your notebook of any errors which you detect, but do not make 
any corrections in the books. After completing your audit, make a report including the neces¬ 
sary exhibits and schedules. In making Exhibit B, show the results in condensed form only, 
and give the details on the schedules. That is, show the gross revenue, the operating expenses, 
and other deductions from revenue, the net profit, and the disposition of the same. 

Hand the report, exhibits, and schedules, together with the books and the vouchers, to 
your teacher. 

2 Audit the books of the W. J. Hilton Shoe Company for December, which will represent 
a fiscal period. 

Apply to your teacher for a set of books and accompanying vouchers, and proceed as in¬ 
structed in No. 1. Strive to improve on your previous effort, and take special pains with your 
report. 

Make Exhibit A in consolidated form. That is, state the different assets and liabilities 
in totals, and when necessary support by schedules. This applies particularly to the current 
asset inventories, and also to the Accounts Receivable, Notes Receivable, etc. 

In making Exhibit B, show gross sales, returned goods, net sales, cost of net sales (support 
by Exhibit B, Schedule 1, which will show the Manufacturing account in detail), gross profit 
on trading, and state the percentage on sales and on cost. Show also the deductions for selling 
expenses, total selling expenses, and percentage, based on the gross profits; the deductions for 
the general administrative expenses, total of the same, and the net profit on trading. 

Hand your report, together with the books and vouchers, to your teacher. 

QUESTIONS 

1 Explain what is meant by ( a ) “auditing,” (6) “audit,” (c) “auditor.” 

2 Of what is C. P. A. the abbreviation? 

3 Explain how a person may become a C. P. A. in your state. 

4 What is the principal object of an audit ? 

5 What is meant by “term of audit,” and what may it be? 

6 What are the names of the first and last dates of the audit term ? 

7 Name the different kinds of audits as regards (a) time when made, and (6) classes of business or 
activities. 

8 What are the duties of an auditor? 

9 What is meant by an “auditor’s working papers”? 

10 Name and explain the errors the presence of which an auditor should detect, or the absence of 
which he should prove, in making an audit. 

11 State what preparation should be made for an audit. 


AUDITING 


319 


12 State briefly the steps to take in making a commercial audit. 

13 How is the cash proved when the audit is begun some time after the terminating date ? 

14 What book or books should an auditor examine with special care for the detection of intentional 
errors ? 

15 What evidence should an auditor generally require that the original entries are in accordance 
with the facts ? 

16 How do auditors indicate that they have examined an entry? A voucher? 

17 What should be done when an error is detected in making an audit ? 

18 How are the books brought into agreement with the facts, as found by the auditor? 

19 What does the auditor’s report contain? 

20 If the auditor is unable or unwilling to certify to the accuracy of the balance sheet, how may he 
indicate that fact? 


APPENDIX II 

TRADE ACCEPTANCES 

Trade Acceptance. — A trade acceptance is similar in form to an ordinary acceptance, 
although differing in character, the purchaser “ accepting ” the drafts of the seller for goods 
actually delivered in accordance with terms as arranged at 30, 60, or 90 days’ sight. It shows 
upon its face that it is to cover the purchase of such goods. Trade acceptances may be used 
by merchants, manufacturers, or producers, selling on terms of 30 days or longer, to finance 
transactions in any and every stage from production to the marketing of goods. 

Definition. — As defined by the Federal Reserve Board: — “A trade acceptance is an 
unconditional order in writing, addressed by one person to another, signed by the person giving 
it, requiring the person to whom it is addressed to pay at a fixed or determinable future time 
a certain sum in money to the order of a specified person. The bill must be drawn by the seller 
on the purchaser of goods sold and accepted by such purchaser.” 

The Use of Trade Acceptances. — The use of trade acceptances is increasing A few years 
ago there were not many American business men who understood what was meant by the term 
“ acceptances.” They rarely were used in general business here, although in England and con¬ 
tinental Europe for years they have been almost the only instrument of credit used in ordinary 
business transactions. A man buys a bill of goods from a wholesaler, and then the wholesaler 
executes a draft on the buyer, who writes across the face of it “ Accepted ” and affixes his name. 
This draft then becomes a negotiable two-name paper which the wholesaler may retain until 
maturity if he wishes, or else take it to his bank and have it discounted at a rate usually con¬ 
siderably lower than that asked for single-name paper. The “ acceptance,” as the indorsed 
draft is called, is an order to pay and prima facie evidence of an obligation. It is a method of 
settling a business transaction that is infinitely superior to the “ open account ” system, which 
until recently was almost the only method of settling accounts used by American business men. 

Previous to about 1860, acceptances were used to some extent in this country, but their 
use was discontinued. With the establishment of the Federal Reserve system, however, and 
the provision in the law making it legal for the banks to take acceptances for rediscount, there 
began an immediate agitation among bankers, credit men, and others interested in economic 
welfare for a return to the use of acceptances here. 

320 


TRADE ACCEPTANCES 


321 


Advantages of Trade Acceptances. — Those who advocated acceptances instead of the old 
“ open account system ” have pointed to the obvious disadvantages of the latter system by 
which the seller must carry the financial burden of the buyer, thereby tying up a vast amount 
of capital that might be otherwise utilized. Credit under the open account system is for an in¬ 
definite instead of a specified period. Collection is uncertain and at times impossible. Hence 
they pointed to the fact that such accounts do not represent “ quick ” assets, as invariably a 
large dealer must borrow money on his own notes at high interest rates to discount his own bills, 
and it is impossible ordinarily to discount open accounts for more than 50 per cent of their 
book value. 

The old system is becoming inadequate to meet the demands of future business conditions, 
while the “ acceptance ” system is so simple and yet so adequate that there is a broad demand 
for its wider use. Consequently a large number of business houses have now undertaken to 
have their transactions settled by means of these useful credit instruments. The open account 
system is of course still in use, and probably will be for years. 

The waste in bad accounts in this country is enormous, and the office overhead cost of the 
open account system undoubtedly is much heavier than that of a system where acceptances 
are generally used. Both of these elements of expense can be greatly reduced as under the 
older method they act as a drag on business. The main advantage, however, in the “ accept¬ 
ance” system, which is not always recognized, is that a large part of the burden of business may 
be shifted to banks since they are best able to carry it. Accounts instead of being a dead weight 
upon the seller become a readily convertible liquid asset at a low rate. The banks can dis¬ 
count them, and they may be rediscounted at the Federal Reserve banks and thus become the 
basis for an expansion of the currency as occasion and conditions may demand. 

Illustration and Creation of Trade Acceptance. — Seller & Co. of New York, N. Y., sells 
to Purchaser & Co. of Boston, Mass., a bill of goods to the amount of $4370, on terms of 60 
days’ net, with a discount privilege of 2 per cent in ten days. When sending the invoice for 
the goods, Seller & Co. include with it a trade acceptance properly filled out and signed by 
themselves, and corresponding to the invoice as to amount and date of maturity. 

Purchaser & Co. may, if they wish, pay bill within the cash discount period. Jn that case 
there would be no need of their “ accepting ” the trade acceptance. If, however, they desire to 


No._£2_ 


At nine 

EOIff THOTI 



TRAPE ACCEPTANCE 

New Vork, N. V., Jan. 17. _191. 


$ 4370,00 


si 


.after_ date pay to the order of OURSELVES 


The obli^jition oCtfe ao^ejitor § 
being in^nformi^^ith+o^gina^ ,dhns 

bank, trust comp«$ or WSker’sdofficP 
o 5 Ala CQ s 


RE E . ^ U3g>|EP,, S F VM1Y.QQ / 1QQ. 


To Purchaser 


Bo 3 ton. l.faaa. 8 * 


a n 3 

& ga 


_Dollars 

■iles out of the purchase of goods from the drawer, maturity 
‘purchase. The drawee may accept this bill payable at any 
fhe United States which he may designate. 




Due_ Aprilg16. | 
Q ** 


§.i9iaiL 

1-3 W 



























322 


APPENDIX II 


take the full credit term allowed, they may “accept ” the trade acceptance by writing or stamp¬ 
ing on its face the words “ accepted ,” the date and the place of payment, usually their local 
bank. 1 They then sign it and return it to Seller & Co. 

It may be assumed that, before signing the trade acceptance, Purchaser & Co. have re¬ 
ceived the merchandise and have assured themselves that it checks up properly with the invoice. 
On the date set for payment they will be expected to have on deposit at the bank indicated 
by them as the place of payment sufficient funds to pay the acceptance on presentation. 

When the signed acceptance is received by Seller & Co. they may keep it until a short 
time before it falls due and then send it to their bank for collection. If they should need funds in 
the meantime, and do not wish to borrow on their own note, they may indorse Purchaser & Co.’s 
acceptance and take it to their bank for discount, or they may sell it in the open discount market. 

If Purchaser & Co.’s acceptance has been discounted at a bank, the bank may retain it in 
its portfolio until maturity, or may sell it to the Federal Reserve bank in their district. 

1 Payment should be made at a bank in the community where the business of Purchaser & Co. is lo¬ 
cated. If at any other place, for example, a bank in Seller & Co.’s community, special understanding 
of such arrangement must be indicated in the body of the acceptance when it is signed, otherwise it may 
not conform to the Negotiable Instruments Act. 


INDEX 


Abstract, of analysis book, 283; of 
card ledger, 172, 183; sales book, 
158; sales sheet, 157. 

Acceptance, dating, 105; effect of, 
106; form, 106; trade, 106, 320. 

Account, accrual, 79; allowances, 
290; balancing, 47; bank, 62, 196; 
cash, 23; consignment, 188; con¬ 
trolling, 173, 191, 225; defined, 
18; discount on purchases, 78; on 
sales, 78; discount on notes, 112; 
fire loss, 112; freight and cartage, 
30; freight in, 233; freight out¬ 
ward, 289, 290; furniture and fix¬ 
tures, 79; general expenses, 78; 
good will, 112, 260; insurance 
prepaid, 79; interest on notes 
payable, 78; inventory, 37; man¬ 
ufacturing, 267; merchandise, 126; 
notes payable, 30; notes receiv¬ 
able, 30; profit and loss, 42, 213, 
240; proprietor’s capital, 40; per¬ 
sonal, 30; purchases, 39, 267; real 
estate, 79; real estate expenses, 
79; royalty, 289; sales, 39, 222, 
267; sales register, 189, 194; se¬ 
curities, 234; selling expenses, 78; 
short and over, 128; surplus, 255; 
trading, 219, 243. 

Accounting, 153. 

Accounts analyzed, 225; classified, 
18, 126; closing, 47; division of, 
225; impersonal, 126; merchandise, 
39; mixed, 126; nominal, 126; 225; 
payable, 18, 172, 219; personal, 
18, 126, 225; real, 126, 225; re¬ 
ceivable, 18, 172, 219; receivable 
and sales, 307; ruling, 47; special 
corporate, 259; summary of rules, 
50; transferring, 111. 

Account sales register, 194. 

Accrual account, 299. 

Accruals, 79. 

Adding machine exercises, 186, 217, 
250, 303. 

Adjusting entries, 93, 121, 240, 248, 
294, 316. 

Adjustments, 93. 

Administrative expenses, general, 
267, 281. 

Admission of partner, 174. 


Allowances, 290. 

Analysis, accounts, 225; balance 
sheet, 306; financial reports and 
statements, 305; profit and loss 
statement, 306. 

Analysis book, 267, 280; abstract 
of, 283. 

Articles of copartnership, 113. 

Asset, defined, 37. 

Assets, circulating, 226; classified, 
127, 226. 

Audit, definition of, 311; conclusion 
of, 316; preparation for, 312; term 
of, 311. 

Auditor, duties of, 311; report of, 
317; working papers, 311. 

Bad debts*, reserve for, 240. 

Balance', defined, 22. 

Balance ledger, 223. 

Balance sheet, 41, 74, 97, 123, 136, 
185, 213, 227, 240, 248, 295, 317; 
analysis of, 40; defined, 37; form 
of, 41. 

Bank, account, 196; how opened, 
62; book, 63; check book, 62; de¬ 
fined and classified, 62; deposit 
slip, 63; draft, 108; pass book, 62; 
statements, 64; reconciliation of 
statements, 65, 199. 

Bill, distinguished from invoice, 75; 
of exchange, 104. 

Bill and charge system, 222. 

Bill of lading, 89; order, 91; straight, 
90; with draft attached, 61. 

Blotter, 166, 203. 

Bonds, 254, 255. 

Bookkeeper, confidential relation of, 
129. 

Bookkeeping, books required, 7; 
defined, 7, 153; double entry, 7; 
object of, 7; single entry, 7, 143; 
summary of procedure, 50. 

Books, auxiliary, 130; index, 130; 
note, 114; principal, 129; stock, 
132. 

Burden, 276; distributing, 277. 

Capital, account, 40; stock, 254; 
working, 255. 

Card ledger, 163, 164, 172. 

323 (new M. i. 


Cash, account, 23; proof, 69, 88; 
register, 158; rules for, 50; sales, 
158; short and over, 128. 

Cash book, 58, 59, 80, 81, 82, 160, 
161, 162, 189, 195, 219, 221, 238, 
271, 280, 314; discussed, 59; petty, 
272; single entry, 143; special 
column, 80. 

Certified checks, 108. 

Changing from single entry to 
double entry, 146, 174. 

Check, 64, 107; book, 62; certified, 
108; canceled, 64; dividend, 259; 
forged, 64; stub, 64,196; voucher, 
269, 271. 

Check, posting, defined, 28. 

Circular letter, form of, 200. 

Circulating assets, 226. 

Classifying expenses, 267. 

Closing entries, 42, 45, 95, 123, 183, 
213, 239, 240, 248, 296. 

C. O. D., 60, 232. 

Collection and exchange, 108. 

Commercial discounts, 78. 

Commission business, 188. 

Common stock, 254. 

Consignments, 188; account, 188; 
ledger, 189, 190; rule for, 189. 

Contingent liabilities, 226, 307. 

Contra entry, 82. 

Controlling accounts, 173, 191, 
225. 

Copartnership, articles of, 113. 

Corporations, 252; books of, 257; 
officers of, 256. 

Corrections, 129. 

Cost, division of, 276; elements of, 
274; factory, 274; keeping, 267, 
274; ledger, 276; prime, 274; 
record, 276. 

Cost of goods sold, 39. 

Counting time, 102. 

Credit, defined, 7; rules for, 50; 
memorandum, 237. 

Creditor, defined, 18. 

Current assets, 127, 226, 306. 

Current assets and current liabili¬ 
ties, ratio, 306. 

Current liabilities, 127, 226, 306. 

Customers’ ledger, 172. 

Customers’ statements, 75, 162. 

B. ELEM. AND ADV.) 





324 


INDEX 


Daybook, 143. 

Debit, defined, 7; rules for, 50. 

Debtor, defined, 18. 

Deposit, how made, 62; ticket, 63. 

Depositor’s proof, 65. 

Depreciation, 94, 240, 294; reserve 
for, 240. 

Deferred assets, 127. 

Deferred liabilities, 127. 

Discount, 77; cash, 78; commercial, 
78; on notes payable, 112; on 
notes receivable, 112; on pur¬ 
chases, 78; on sales, 78; rules for, 
52, 53; trade, 78. 

Disposition of products, 266. 

Dissolution of partnership, 239, 
248. 

Distribution, 281. 

Dividend book, 258; check, 259. 

Dividends, 255. 

Division of accounts, 225. 

Division of cost, 276. 

Drafts, acceptance of, 105; parties 
to, 104; time, 104; with bill of 
lading, 61. 

Drawee, defined, 104. 

Drawer, of draft, 104; of note, 29. 

Entries, closing, 42, 95, 123, 240, 
248, 296; opening, 136. 

Entry, double, 7; single, 7, 143. 

Equality of debits and credits, 74. 

Errors, suggestions for correcting, 
129; trial balance, 36; kinds of, 
311. 

Exchange, collection and, 108; bills 
of, 104. 

Exercises, account sales, 215; ad¬ 
justing, 100; auditing, 317; cash 
book, 59, 83, 101; adding ma¬ 
chine, 186, 217, 250, 303; cor¬ 
poration, 263; general, 248; jour¬ 
nalizing, 55, 109, 136; ledger, 58, 
99; profit and loss, balance sheet, 
and closing, 54; manufacturing, 
300; purchases journal, 62; sales 
journal, 61; trading statements 
and percentages, 56, 57, 184; 
working sheet, 138. 

Expense ledger, 280, 282. 

Expenses, administrative, 267, 281; 
classifying, 267; general, 78, 267, 
281, 283; indirect, 276; manu¬ 
facturing, 267, 281; real estate, 
79; selling, 78, 224, 267, 281, 
283. 

Express C. O. D., 232. 

Face, of notes, 30. 

Factory system, 266. 

Filing canceled checks, 64. 

Findings, 278. 

Finished goods, 273, 277, 280. 


Fire loss, 112; rules for, 53; state¬ 
ment, 122. 

Fiscal period, defined, 37. 

Fixed assets, 127, 226. 

Fixed liabilities, 127, 226. 

Floating assets, 226. 

Floating liabilities, 226. 

Flour and grain business, January, 
15; February, 25; March, 31; 
April, 66. 

F. O. B., 287. 

Forged checks, 64. 

Forwarding, 234. 

Freight, charges, 202; C. O. D., 232; 
freight in account, 233; outward 
account, 289, 290; prepaid, 288, 
289. 

Freight and cartage, 30; rules for, 

51. 

Furniture and fixtures, 79; rules for, 

52. 

General administrative expenses, 
267, 281, 283. 

General expenses, 78; rules for, 50. 
General rule, 125. 

Goods in process, 277. 

Good will, defined, 112; 260; rules 
for, 53. 

Good will and capitalization, 307. 
Government supervision, 253. 
Grocery business, retail, 155, 174. 
Gross profit on sales, 39. 

Holding companies, 252. 

Impression book, letter, 194, 198. 
Imprest fund, 271. 

Index, 96; book, 130. 

Indexing, 195. 

Indirect expense, 276. 

Indirect labor, 276. 

Indorsement, 29; blank, 29; purpose 
of, 30; special, 30. 

Ink, red, 6. 

Insolvency, defined, 127. 

Insurance, prepaid, 79; rules for, 
52. 

Interest, defined, '77; on notes, 78; 
prepaid, 79; rules for, 52, 53; 
sixty-day method, 77. 

Interest on partners’ investments, 
227. 

Inventories, 38, 39, 73, 96, 136, 149, 
239, 240, 248, 295; in expense 
accounts, 129. 

Inventory, 172; defined, 37; per¬ 
petual, 132, 272; physical, 37; 
rules for, 51. 

Invested capital, total cost of prop¬ 
erty and equipment, 307. 

Invoice, defined, 75. 

Invoices, record of, 268. 

(NEW M. I. B. ELEM. AND ADV.) 


Journal, 7, 155, 189, 219, 238, 280; 
purchases, 61, 159, 221, 238, 315; 
sales, 60, 219, 222, 243, 280; sin¬ 
gle entry, 143, 155. 

Journalizing, defined, 7. 

Labor, direct, 276; indirect, 276; 
ticktet, 276. 

Lasts and patterns, 278. 

Ledger, 7; account file, 163; bal¬ 
ance, 223; card, 163, 164, 172; 
closing, 42, 183, 296; consign¬ 
ment, 189, 190; cost, 276; ex¬ 
pense, 280, 282; general, 189, 219, 
223, 225, 280; index, 201; loose- 
leaf, 163; loose-leaf consignment, 
189; private, 225; purchases, 219, 
223, 315; sales, 219, 223, 280; sec¬ 
tional sales, 224; self-balancing 
224; shipment, 191, 212; subsid¬ 
iary, 173, 191. 

Letter, impression book, 194, 198. 

Liabilities, 226; classified, 127. 

Liability, defined, 37. 

Liquid assets, 226. 

Loose-leaf ledger, 163. 

Loss, defined, 37; fire, 112. 

Manufacturing, 266; accounts, 267, 
294; activities, 267; expenses, 267, 
281, 283; records, 267; state¬ 
ments, 296, 297; trading, profit 
and loss account, 295. 

Material requisition, 275. 

Materials, 278. 

Maturity, of notes, 30. 

Merchandise, defined, 16; accounts 
with, 39; mixed account, 126. 

Minute book, 257. 

Mixed accounts, 126. 

Monthly statements, 75, 76. 

Net insolvency, 127. 

Net worth, 39, 40. 

Nominal accounts, 126, 225. 

Notes, defined, 29; face, 30; in¬ 
dorsement, 29; maturity, 30; ne¬ 
gotiation, 29; parties to, 29. 

Notes payable, 29, 155; distin¬ 
guished from notes receivable, 30; 
rules for, 51. 

Notes receivable, 29, 155; distin¬ 
guished from notes payable, 30; 
rules for, 51. 

Notes receivable and notes pavable 
books, 114, 155, 219, 223, 280. 

Opening entries, 136. 

Order, shipper’s, 232; production, 
275. 

Order bill of lading, 91, 209. 

Orders, approval of, 230; back, 230. 

Organization, factory, 266, 278. 




INDEX 


325 


Outstanding stock, 254. 

Overhead charges, 276. 

Paging, 20. 

Partnership, defined, 113. 

Pass book, 62. 

Payee defined, 29. 

Payroll, 276. 

Pencil footings, 23, 29. 

Perpetual inventory, 132, 272. 

Personal accounts, 18, 225; rules 
for, 50; ruling, 22. 

Petty cash book, 272, 280, 287, 
315. 

Physical inventory, 37. 

Posting, defined, 18; account sales 
register, 194, 212; cash book, 59, 
82, 171, 183, 189, 195, 211, 238; 
final, 211; journal, 171, 183; 
hints on, 114, 130; instructions 
for, 19, 82; proof of, 155; pur¬ 
chases journal, 61, 171, 183, 189, 
211, 238; shipment ledger, 212; 
sales journal, 61, 194, 211, 238; 
single entry, 143; time of, 19, 2.9; 
voucher register, 294. 

Power of attorney, 66. 

Preferred stock, 254. 

Preliminary trial balance, 316. 

Preliminary work, 165, 174, 199, 
226, 243, 281. 

Prepayments, 79. 

Price lists, selling, 66, 67, 84, 85, 
133, 230, 231. 

Private ledger, 225. 

Process, goods in, 277; method, 
273. 

Production, 266, 278; methods, 273; 
order, 275; order method, 273; 
reports 277. 

Profit, 37; net, 39; on sales, 39. 

Profit and loss, account, 42; rules 
for, 51; statements, 37, 39, 73, 
96, 122, 136, 213, 240, 248, 294, 

317. 

Proof, cash, 88, 221, 312; trial bal¬ 
ance, 49; of posting, 155. 

Propositions, 260. 

Proprietor’s, capital account, 40; 
balancing, 47; personal, 30; rules 
for, 50; statement, 173. 

Proprietorship equation, 39. 

Protest, 129. 

Purchases, 16, 267; discount, 78; 
journal, 61, 159, 221, 238, 315; 
ledger, 219, 223, 315; order blank, 
268; returned, 233; rules for, 50. 


Questions, 24, 49, 76, 99, 124, 149, ! 
187, 217, 251, 265, 303, 318. 

Real accounts, 126, 225. 

Real estate, 79; rules for, 52. 

Real estate expenses, 79; rules for, 
52. 

Receiving book, 189. 

Reconciliation of bank statement, 
65, 199. 

Red ink, 6. 

Reserve accounts, 244, 307. • 

Resource, see asset. 

Retail grocery business, 155, 174. 

Return books, 233, 315. 

Returned purchases, 233; sales, 

233. 

Review questions, 24, 49, 76, 99, 
124, 149, 187, 217, 251, 265, 303, 
318. 

Royalty system, 289. 

Rules, summary of, 50. 

Ruling, 47. 

Sales, abstract of, 158; abstract sales 
sheet, 157; account, 222, 267; 
book, 189, 192, 219, 222, 238, 315; 
cash, 158; discount, 78; from 
blotter, 203; gfoss profit on, 39; 
journal, 60, 219, 222, 243, 280; 
ledger, 219, 223, 280; posting, 
194, 211, 238; returned, 233; 
rules for, 51; slip, 155. 

Sectional sales ledgers, 234. 

Securities, account, 234. 

Self-balancing ledgers, 224. 

Selling expenses, 78, 241, 267, 281, 
283; rules for, 53. 

Selling price lists, 66, 67, 84, 85,133, 
230, 231. 

Shipment ledger, 189, 191, 212. 

Shipments, 188; account, 188: rule 
for, 189. 

Shipper’s order, 232. 

Shipping business, 188. 

Shoe manufacturing business, 277. 

Short and over, account, 128. 

Signature card, 62. • 

Single entry, defined, 7, 143, 155; 
cash book, 143; changing to 
double entry, 146, 174; day book, 
143; statement, 146, 172. 

Sinking fund, 255. 

Special column cash book, 80. 

Special corporate accounts, 259. 

Special principles of accounting 
procedure, 125. 

(NEW M. I. B. ELEM. AND ADV.) 


! Statement, customer’s, 75, 162; fire 
loss, 122; assets and liabilities, 
172, 183, 214; form of, 39, 242; 
manufacturing, trading, profit 
and loss, 297; monthly, 75; profit 
and loss, 37, 39, 73, 96, 122, 136, 
184, 213; proprietor’s, 173; single 
entry, 146; trading profit and 
loss, 243. 

Stock, book and market value, 307; 
capital, 254; certificate book, 258; 
certificates, 254; common, 254; 
dividend book, 258; earnings per 
share, 307; keeping, 239, 272; 
kinds of, 254; ledger, 258, 273; 
outstanding, 254; preferred, 254; 
report, 267; transfer book, 258; 
treasury, 254; subscription book, 
258. 

Stock book, 132. 

Subsidiary ledgers, 173, 191. 

Summary of rules, 50. 

Supporting records, 228. 

Surplus, 255. 

Taking charge of a set of books, 127. 

Tea, coffee, and spice business, 84. 

Terms of payment explained, 60. 

Time, counting, 102. 

Trade, acceptance, 106, 320; dis¬ 
count, 78. 

Trading account, 219, 243. 

Trading and profit and loss, 243. 

Transaction, defined, 7. 

Transactions, 15, 25, 31, 66, 84, 114, 
133, 147, 165, 176, 202, 229, 243, 
285. 

Transfer book, 254; agents, 259. 

Transferring accounts, 111. 

Transit number, 63. 

Treasury stock, 254. 

Trial balance, 22, 29, 36, 73, 96, 122, 
136, 183, 213, 238, 248, 282, 295; 
defined, 22; form of, 24, 38; er¬ 
rors, 36; arrangement of, 38, 131. 

Trusts, 253. 

Turnover, 240, 306. 

Voucher, check, 269, 271; jacket, 
269; register, 271, 280, 315; sys¬ 
tem, 269. 

Wage systems, 276. 

Wholesale carpet business, 132. 

Wholesale dry goods business, 219. 

Wholesaling, 219. 

Working sheet, 138. 














































































































